The Duties Amendment (Abolition of State Taxes) Act 2006 and the State Revenue Legislation Amendment Act 2006 were assented to on June 20 2006.
Amendments to Chapter 2 ensure that duty continues to be payable on any premium paid or payable in respect of a lease (even after 1 January 2008). This applies to leases first executed on or after 1 July 2006.
'Lease' means a lease of land in NSW or an agreement for a lease of land in NSW.
'Premium' in respect of a lease entered into pursuant to an option includes an amount paid or payable for the grant of the option.
Reassessment of duty - early termination of a lease
Amendments to section 177 prevent a refund of lease duty being given if a lease is terminated before the end of its term, unless the Chief Commissioner is satisfied the leased premises are not being occupied by the lessee or an associated person and that the lessee or an associated person does not propose to resume occupation of the leased premises. This applies to applications made on or after 1 July 2006.
These amendments apply from 1 July 2006.
Limited vs 'all moneys' mortgages
The amendments change the way duty is charged on certain mortgages, so as to make a distinction between 'all moneys' mortgages and mortgages for a limited amount. The main effect of the change is that, if the amount of advances secured by a mortgage is a definite and limited sum, mortgage duty is charged on that definite and limited sum and any advances that exceed that sum (rather than the amount of advances).
An amendment to section 216 provides a concession for the calculation of mortgage duty on mortgages that affect property both within and outside Australia. The amendment allows the value of the offshore property to be taken into account in determining the proportion of the advances under the mortgage that is dutiable in NSW.
The amendments deem instruments of security that secure, or partly secure, the same money to be part of a mortgage package (and assessed as if they were one mortgage) if they are first executed within any period of 28 days. A collateral mortgage that secures or partly secures the same money will also be considered part of the package.
In the case of a further advance, a mortgage package includes an instrument of security executed after the initial liability date for a mortgage package that secures or partly secures the same money as the mortgage package.
Mortgage packages where one or more instruments secure a limited amount
The amendments make provision for the assessment of mortgage packages if the amount secured by the mortgage package over property in Australia is a definite and limited sum, or the amount secured by the mortgage package over property in NSW is a definite and limited sum.
The provisions ensure that the dutiable proportion of any advances made in respect of the mortgage is calculated by reference to the following:
in the case of a mortgage package with an Australian limit, the dutiable proportion of that limit;
in the case of a mortgage package with a NSW limit, the dutiable proportion of all advances made under the mortgage, or the NSW limit, whichever is lower.
Advance of $50 million secured by mortgages over property in NSW and QLD. NSW mortgage limited to $15 million. Value of NSW property $30 million and QLD property $30 million.
NSW proportion of advance is $25 million. NSW limit is $15 million.
Therefore duty is payable in NSW on $15 million (the lower amount).
Collateral mortgages - anti-avoidance measure
Collateral mortgages are mortgages that secure the same money as is secured by another mortgage. If the other mortgage has already been stamped in NSW or another jurisdiction, no duty is chargeable. This prevents double duty.
The purpose of the amendment is to prevent the avoidance of duty in NSW by using a mortgage that is collateral to a mortgage that has been stamped in another jurisdiction where mortgage duty has already been reduced. The amendment allows a mortgage that is collateral to a mortgage that has been stamped in a jurisdiction where mortgage duty is reduced on or after 1 July 2006 to be assessed as if it were part of a mortgage package, with a cap on duty applying to prevent double duty.
Advance of $20 million secured by a mortgage over property in WA dated 1 July 2006 (duty at half rate paid, approx $40,000) and mortgage over NSW property executed on 1 August 2006. Property is 40% in WA and 60% in NSW.
NSW duty payable as a package is on $12 million. Duty = $47,941.
Maximum duty (NSW duty on $20 million) = $79,941
NSW ($47,941) + WA ($40,000) = $87,941 (exceeds maximum duty).
Hence NSW duty payable is reduced to $79,941 - $40,000 = $39,941.
Property affected after date of first execution
The amendments extend mortgage duty to instruments of security where certain property in NSW is affected by the instrument after the date the instrument is first executed. The amendment extends an existing provision relating to instruments of security that affect land in NSW after first execution. The extension will not apply to instruments of security that affect certain marketable securities and other interests. This will ensure margin lending arrangements continue not to be taxed.