Investment housing
Advances made on or after 1 July 2008
Mortgage duty is not chargeable in respect of a mortgage if the mortgage secures an advance or advances made for the purpose of investment housing and no other advances (Section 221C Duties Act 1997).
This section applies in respect of a mortgage only if the borrower under the mortgage is a natural person or, if there is more than one borrower, each of them is a natural person.
An advance is made for the purposes of investment housing if it is to be applied wholly or predominantly for one or more of the following purposes:
a) financing the acquisition of investment housing
b) financing the construction of investment housing
c) financing alterations or additions to investment housing
d) repaying another advance, if the advance to be repaid was made for the purpose of investment housing (within the meaning of this section).
Investment housing is defined as any private dwelling house that is used, or is intended to be used and or sold, for investment or business purposes (or both) by the borrower or any of the borrowers.
Alterations or additions, in relation to a private dwelling house, include:
a) any improvements to the parcel of land on which the dwelling house is constructed, and
b) the maintenance, repair or renovation of the dwelling house or of an improvement referred to in paragraph (a).
Other advances
If a mortgage secures an advance made for the purpose of investment housing and another advance that is not made for that purpose, mortgage duty is chargeable in relation to that other advance.
An exemption provided for by this section is not available in respect of any advance that is to be applied wholly or predominantly for business or investment purposes (or both).
Evidence
To satisfy OSR that an advance falls within section 221C (investment housing) of the Duties Act 1997, the mortgagee will need to have evidence of the following:
i) the date and amount of the advance;
ii) the identity of the borrowers;
iii) the property description (e.g. folio identifier) of the securities; and
iv) the predominant purpose of the advance.
In addition to the above, the mortgagee will need the following information to satisfy s221C(4)(d) - (ie repaying another advance):
i) the identity of the borrowers under the earlier mortgage, and
ii) the predominant purpose of the advances secured by such mortgage.
In respect of sections 221C, the loan contracts and mortgage documents held by the mortgagee should satisfy the amount of advance, identity of the borrowers, and the property description. The predominant purpose of the advance will need to be determined as part of the mortgagees application process, or as required for APRA (Australian Prudential Regulation Authority) reporting. In respect of section 221C(4)(d):
i) a copy of the earlier loan contract; or
ii) a declaration made by the borrower containing all the above information, will also be required.
Agents acting on behalf of financial institutions can rely on instructions from such institution regarding the liability of an advance and whether the mortgage needs to be stamped.
Stamping notation
Where the mortgagor is also a natural person, the mortgage can be registered without having to be stamped by the Office of State Revenue.
Lodging documents at Office of State Revenue
When lodging a mortgage for a refund of duty, or for marking where the mortgagor is a company, sufficient evidence (as outlined above) would need to be lodged to prove the advance falls under section 221C of the Duties Act 1997. Alternatively, a letter from the mortgagee confirming all the relevant details will be accepted.
However, to determine the purpose of an earlier advance with another institution (s221C(4)(d)), a copy of the earlier loan contract, or a declaration made by the borrower, containing the relevant information, will be required.
Department of Lands (LPI)
From 1 July 2008 the NSW Department of Lands (LPI) will register Real Property Mortgages which fall under the investment housing provisions (Section 221C Duties Act, 1997) without any stamp on the document, where the mortgagors are natural persons.
The factsheet stamping and marking documents before lodging at Department of Lands has been updated to reflect this change.
Where the mortgagor is a company, such mortgage will need to be stamped by OSR, or for EDR clients as shown below
