Duties Act (NSW) changes

On 6 June 2006, the Duties Amendment (Abolition of State Taxes) Bill 2006 (Bill) was introduced into the New South Wales (NSW) Parliament. This Bill provides for the repeal or reduction of a number of state taxes and also makes significant changes to the mortgage duty provisions.

Summary of changes to stamp duty rates

• The grant of a lease with a premium will be a dutiable transaction, subject to duty at 5.5 per cent.
• Duty on the hire of goods will be abolished from 1 July 2007.
• Duty on the rent component of leases will be abolished from 1 July 2008.
• Duty on NSW shares and units will be abolished from 1 January 2009 (although land rich duty will remain).
• Mortgage duty will be halved from 1 January 2010 (from $4 per $1000 to $2 per $1000) and abolished on 1 January 2011.
• Duty on the transfer of non-land business assets including statutory licences will be abolished from 1 January 2012.

Details of changes to mortgage duty — for advances made from 1 July 2006

After acquired property

Currently, a mortgage which does not secure property in NSW when it is executed is chargeable with mortgage duty only if it secures land within 12 months after it is signed.

Proposed change: In addition, a mortgage which does not secure property in NSW when it is first executed, but later attaches to any NSW property (other than listed shares or units) will attract mortgage duty. However, this only applies if the mortgage is part of an arrangement to secure specific property. This will be same as in Queensland and Western Australia. 

Limited securities

Currently, the Duties Act does not distinguish between an ‘all moneys mortgage’ and a limited security. All mortgages are subject to duty on the amount of advances secured by the mortgage and recoverable under the mortgage. This means that limited securities are only subject to duty on the lower of the advances made, or the limit.

Proposed change: If the mortgage specifies a limit on the amount secured, duty will be payable on that limit. Any increase in the limit will attract further duty. A limit on the amount recoverable under a mortgage is effective as a limit on the amount secured.

Multi-state mortgages and mortgage packages

Currently, the Duties Act apportions the duty payable on multi-state mortgages and mortgage packages. That apportionment is based only on Australian assets.

Proposed changes:

• The apportionment will include overseas assets as well as Australian assets—except as outlined below.
• Mortgage packages will initially include only mortgages executed within a 28-day period. Later securities will be treated as part of the package if a further advance is made.
• A mortgage package may state a limit on the amount secured over NSW property. Duty will be payable on the lesser of that limit, or the NSW apportionment of the total advances secured.
• A mortgage package may state a single limit on the amount secured over all Australian property. Duty will be payable on a proportion of the Australian limit.

The proportion is: (NSW property) / (Australian property), and excluding overseas property.

Collateral mortgages

Currently, collateral mortgages are only subject to a nominal duty of $10. A collateral mortgage must secure the same money as a mortgage that has been stamped in NSW or another state.

Proposed changes:

• The rate of mortgage duty in some states is being reduced from 1 July 2006 (commencing with a halving of the rate in Western Australia and Tasmania). If a security has been stamped in one of those states, it will not be possible to stamp a collateral security in NSW with only $10 duty.
• Instead, the collateral mortgage and the existing stamped instruments will be treated as a mortgage package.
• However, the total amount of duty payable in NSW and elsewhere is capped to the amount of duty that would have been paid in NSW if there were no existing stamped instruments.

This article was written by Steven Stevens, Partner and Nicholas Clifton, Solicitor.

For more information please contact

Name : Steven Stevens
Title : Partner
Office : Melbourne
Phone : +61 3 9288 1241
Fax : +61 3 9288 1567
Email : steven.stevens@freehills.com

Name : Matthew Stutsel
Title : Partner
Office : Sydney
Phone : +61 2 9225 5065
Fax : +61 2 9322 4000
Email : matthew.stutsel@freehills.com

Name : Richard Giannone
Title : Partner
Office : Sydney
Phone : +61 2 9225 5326
Fax : +61 2 9322 4000
Email : richard.giannone@freehills.com