Upcoming Mallesons seminarsHolders of mortgages securing finance over NSW property; acquirers of shares or units in NSW landholders.
What do you need to do?Review mortgages and charges which are supported by limited securities. Consider the impact of the general anti-avoidance provision on existing and future arrangements. Be aware that new landholder duty affects 50% acquisitions of private landholders and 90% of some listed and public landholders.
Glynn Gill
Legal Consultant
Peter Green
Partner
T +61 2 9296 2389
Frank Brody
Partner
T +61 3 9643 4075
Sydney
The NSW government has announced significant changes to the stamp duties laws which will impact on financiers, borrowers, property development and the secondary market for landowning entities.
Mortgage Duty
The mortgage duty provisions have largely remained intact. Duty is still charged by reference to “advances”, but the Bill makes major changes to limited securities, both currently existing and those entered into from 1 July 2009.
If the limited securities have outstanding advances on 1 July 2009 and a further dutiable advance is then made (or the limit is increased) then the securities are potentially liable to be reassessed on the outstanding advances above the limit. Where the security package comprises non-NSW securities, allowance is made for the proportion of non-NSW property then secured.
Advances made from 1 July 2009 potentially give rise to duty on other securities arrangements where duty has been paid at less than the full NSW rate, after allowing for duty paid elsewhere.
From 1 July 2009 careful consideration will need to be given to the impact of the general anti-avoidance provisions on pre-1 July secured facilities where secured liabilities are altered or a new liability is created.
The Bill does not affect securities which have never attracted a liability to duty under the NSW Act.
Landholder Duty
The Bill significantly changes the NSW rules on acquisitions of land owning entities. The key change is to abolish the shelter for entities with less than 60% of their assets in land. Duty is now levied on plant and equipment as well.
New “landholder duty” applies both to a private entities (effective 1 July 2009) as well as listed and some public entities (effective 1 October 2009).
The acquisition threshold is increased from 20% to 50% for private trusts, remains at 50% for private companies and is triggered at 90% for listed/public landholders.
Perhaps, as a concession to the Global Financial Crisis, duty on listed/public landholder acquisitions is calculated on only 10% of the value of directly and indirectly owned land plus plant and equipment.
There are detailed provisions on how old “landrich” interests acquired before 1 July are to be aggregated with new “landholder” interests acquired from 1 July.
General Anti-Avoidance Provision
For the first time NSW has included a general anti-avoidance provision. It mirrors the rules in Queensland and Western Australia and targets “artificial, blatant or contrived schemes” to reduce duty. The subjective purpose of the participants is irrelevant.
Difficulties in quantifying the amount of duty avoided plus a rule that fines for late payment of duty begin to run from the date of avoidance will put pressure on taxpayers to seek rulings from the Office of State Revenue.
The provisions extend to schemes put in place before 1 July 2009 to the extent they are carried out on or after 1 July 2009. Otherwise, the new anti-avoidance rules are not retrospective.