NSW Mortgage duty
The NSW Treasurer, The Hon. Michael Costa MLC, announced changes to State Taxes and duties as part of the 2007 Budget. These changes have been introduced under the State Revenue and Other Legislation Amendment (Budget) Act 2007.
Mortgage duty is being abolished in three stages, commencing with the abolition of duty on mortgages for the purposes of owner occupied housing from 1 September 2007.
Advances made on or after 1 September 2007
Mortgage duty is not chargeable in respect of a mortgage if the mortgage secures an advance or advances made for the purpose of owner occupied housing and no other advances (Section 221B 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 owner occupied housing if it is to be applied wholly or predominantly for one or more of the following purposes:
a) financing the acquisition of a residence
b) financing the construction of a residence
c) financing alterations or additions to a residence
d) financing the acquisition of residential land
e) repaying another advance, if the advance to be repaid was made for the purpose of owner occupied housing (within the meaning of this section).
A residence is a private dwelling house that is used and occupied or intended to be used and occupied by the borrower, or by any of the borrowers, as a place of residence
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)
If a mortgage secures an advance made for the purpose of owner occupied 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)
To satisfy OSR that an advance falls within section 221B (owner occupied 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 (eg 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 s221B(4)(e) - (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 221B, 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 sections 221B(4)(e):
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.
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 221B 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 (s221B(4)(e)), a copy of the earlier loan contract, or a declaration made by the borrower, containing the relevant information, will be required.
Land and Property Information (LPI)
From 1 September 2007 the NSW Land and Property Information (LPI) will register Real Property Mortgages which fall under the owner occupied housing provisions (Section 221B Duties Act, 1997) without any stamp on the document, where the mortgagors are natural persons.
The factsheet Stamping and Marking documents before lodging at LPI 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