Business assets (not including land)
An agreement for sale or transfer first executed on, or after 1 July 2016 is not liable to duty. What is meant by first executed?
Under section 295 of the Duties Act 1997 (the Act), an instrument is taken to be first executed the first time that it is signed and sealed, or signed (as the case may be) by any party to it. An agreement for sale is deemed to be first executed on the date of exchange of contracts.
Can a sale of business be liable to duty after 1 July 2016?
Yes, duty is still payable on the dutiable value of any dutiable property which forms part of the transaction, such as land or an interest in land (which includes a leasehold interest and fixtures).
If a sale of business includes land or an interest in land, is duty also payable on the value of goods (such as moveable plant and equipment) being sold?
Yes, under section 11(1)(j) of the Act, goods in NSW, are dutiable property if the subject of an arrangement that includes other dutiable property, such as land or an interest in land. Section 11(1)(j) includes a list of goods which are not dutiable, such as stock-in-trade.
An example of dutiable goods would be equipment used in the operation of a business, such as an office computer.
Note: no duty would be payable in respect of the goods if they comprise 90% or more of the value of the dutiable property being sold (see section 26 of the Act and Revenue Ruling DUT 004).
Is a transfer, assignment or surrender of lease still liable to duty from 1 July 2016?
Yes, a lease is an interest in land, and a transfer, assignment or surrender of lease is liable to duty at the general rate set out in section 33 of the Act on the dutiable value of the interest transferred.
If a sale of business includes a transfer of a nominal valued lease and goods, and no other dutiable property, is the transfer of lease liable?
Duty would be payable at $10 on the Sale of Business Agreement, $10 for the Transfer of Lease and $10 for the Duplicate Sale of Business Agreement. All documents will need to be stamped.
How is duty calculated on an agreement for sale of land and an agreement for sale of business which are part of the same arrangement?
The duty payable on the agreement for sale of land will be calculated on the value of the land (including improvements) plus the value of any dutiable property sold under the sale of business agreement (such as dutiable goods under section 11(1)(j)) of the Act. The sale of business agreement would then be stamped with duty of $50 under section 18(1) of the Act.
For example, the following an agreement involves a sale of both land and business:
Land value = $500,000
Goodwill = $200,000
Plant and equipment = $100,000
Stock-in-trade = $50,000
The duty payable is:
- $22,490, based on $600,000, i.e. land of $500,000 plus Plant & equipment of $100,000 on the agreement for sale of land.
- $50 on the agreement for sale of business.
Duty of $10 would still be payable on any transfer executed pursuant to the above agreements.
Apportionment of the dutiable and non-dutiable items would generally be accepted where the vendor and purchaser are acting at arms’ length. Certified financial statements may also be required. An independent valuation of all items of dutiable property is required where the vendor and purchaser are not acting at arms’ length.
What is meant by same arrangement?
Examples of what would be viewed as the same arrangement would include agreements that contained an interdependency clause, or where options were entered into prior to the agreements.
Do the vendors and purchasers have to be the same for the agreements to constitute the same arrangement?
No, whilst this is a strong indicator of the same arrangement, there is no requirement that the vendors be the same, or associated persons, or that the purchasers be the same or associated persons.
What if an agreement for sale of land is entered into before 1 July 2016 and an agreement sale of business, which is part of the same arrangement, is entered into on or after 1 July 2016?
The agreements would be considered a single dutiable transaction and be liable as if entered into prior to 1 July 2016.
Licences and Permissions
Is a sale or transfer of water rights liable to duty from 1 July 2016?
No duty is payable on the sale or transfer of a water licence or permit, or shares in an irrigation company, which occurs on or after 1 July 2016.
What if the water rights are included in an agreement for sale of land or business?
No duty is payable on the value of those rights and it will be necessary to apportion the value or consideration between each type of property.
However water rights which are included in a sale of land, which cannot be transferred separate from the land and which are not attached to a licence, permit or share would simply add value to the land and be liable to duty.
Marketable securities (shares and units)
Do transfers of shares or units first executed on or after 1 July 2016 need to be stamped or marked?
There is no need to stamp or mark transfers of shares or units first executed on or after 1 July 2016.
What duty applies where an agreement for sale of shares is first executed prior to 1 July 2016 and the subsequent transfer is first executed on or after 1 July 2016?
Duty is payable on the agreement for sale but no duty is payable on the transfer (the transfer does not need to be stamped or marked).
Is an acquisition of shares or units in a landholder still liable to duty after 1 July 2016?
Whilst marketable security duty will not be payable on the share or unit acquisition, landholder duty is still payable on certain acquisitions in landholders under Chapter 4 of the Act
A landholder is a unit trust scheme, a private company or a listed company that has land holdings in New South Wales with a threshold value of $2,000,000 or more.
For more information, read the Landholder Duty factsheet.
Is a transfer of a land use entitlement still liable to duty after 1 July 2016?
Yes, a land use entitlement remains an item of dutiable property under section 11(1)(c) of the Act and a transfer of shares or units that confer a land use entitlement is liable to duty at the general rate set out in section 33 of the Act.
Land use entitlement is defined in the dictionary of the Act as an entitlement to occupy land within NSW conferred through an ownership of shares in a company or an ownership of units in a unit trust scheme, or a combination of a shareholding or ownership of units together with a lease or licence.
A company title dwelling is a common type of land use entitlement
Is an acquisition of a land use entitlement by an allotment of shares or issue of units liable to duty after 1 July 2016?
Yes, a land use entitlement remains an item of dutiable property (section 11(1)(c)) and an acquisition of a land use entitlement by an allotment of shares or an issue of units is liable to duty under Part 4 of Chapter 2 (sections 132 to 137) of the Act.
What duty is payable on a mortgage first executed before 1 July 2016 where the initial advance is not made until after 1 July 2016?
Duty of $5 is payable on the mortgage and upstamping is not required when the advance is made.
What is the duty payable on an advance made on or after 1 July 2016 secured by a mortgage dated before 1 July 2016?
No duty is payable on the advance and the mortgage does not need to be upstamped in respect of such advance.
Is duty payable on a caveat first executed on or after 1 July 2016, protecting an interest under an unregistered mortgage?
If the mortgage is first executed on or after 1 July 2016, no duty is payable on the caveat and it does not need to be stamped or marked
If the mortgage is first executed prior to 1 July 2016 the caveat is liable to:
- duty of $50 if the mortgage is stamped or not chargeable with duty; or
- the same duty that is payable on the mortgage if the mortgage is not stamped.
Is duty payable on a mortgage executed on or after 1 July 2016 to refinance mortgage executed prior to 1 July 2016?
No duty is payable on such mortgage and it does not need to be stamped or marked.
A new NSW mortgage is executed prior to 1 July 2016 and forms part of a mortgage package with earlier mortgages. No further advance is made until on or after 1 July 2016. What duty is payable on the new mortgage?
The mortgage is liable to duty on the amount of liable advances secured as at the date of the new mortgage.
If duty has been paid in respect of those earlier mortgages the new mortgage would be stamped with duty of $50.
If the advances secured by the earlier mortgages were not chargeable because they were owner occupied or investment housing loans to natural persons, the new mortgage is not chargeable with duty and does not need to be stamped or marked.
If the earlier mortgage has not been stamped because it is an interstate mortgage, the new mortgage would be liable to mortgage duty on the amount of liable advances secured.