Here is information about 2 changes, and 2 proposed changes, to Victorian stamp duty law.
Currently the Victorian Duties Act 2000 (the Act) imposes double duty to a sub-sale arrangement. Broadly a sub-sale occurs when a party to a contract of sale for land assigns, nominates or otherwise transfers its rights under the contract to some other party so that the other party completes the acquisition. Not all sub-sales are dutiable under the Act. Only sub-sales involving additional consideration, land development and certain options are dutiable.
The sub-sale rules as originally enacted did not adequately deal with "fractional sub-sales" — that is, on some partial transfers, nominations etc. of contract rights. An example of a fractional sub-sale is where:
The changes ensure that the additional consideration in the above example is now dutiable as a separate further transfer.
Changes have also been made to ensure that duty applies to fractional sub-sales in circumstances of land development and options.
The changes took effect on 11 December 2008, in Victoria only. (Other states and territories remain as they are.)
Currently, thanks to an exemption in the Act, duty does not apply to transfers of property in and out of a bare trust arrangement. A bare trust exists when property is transferred to a trustee/nominee without any change in the underlying beneficial ownership of the property.
There has been some doubt about the type of dealings to which the exemption applies.
From 11 December 2008, the exemption applies in Victoria:
Except for leases that have a covenant for future sale, lease instruments have not been subject to duty in Victoria since Chapter 5 of the Act was repealed in 2001 after the introduction of GST.
The Victorian Government believes leases have been used to obtain defacto ownership rights over real property, without paying duty. The concerns were particularly acute in the case of:
As an anti-avoidance measure, new rules are proposed to impose duty:
(The new rules are not intended to apply to normal commercial leases for which market rent is payable and no premium is involved.)
Duty will be calculated on the greater of:
Charging duty on the unencumbered value of the land being leased has the same effect as charging duty on a transfer of the ownership of that land.
(The proposed changes are to Victorian law only.)
The value of any lease to which duty applies under the changes may need to be included in the landholdings of a company or trust under the land rich rules in the Act.
The new rules are still in Bill form but will apply retrospectively from 21 November 2008 when passed.
The Victorian government has proposed to reduce the period in which documents must be lodged and duty paid. Currently, the period is 90 days. The proposal is to reduce the period to 14 days.
The new rule will take effect when the Bill is passed in 2009.
No other State or Territory in Australia maintains such a short lodgement/payment rule. The proposed changes are to Victorian law only.
If you would like more information , please contact Maddocks on 03 9288 0555.
Andrew is a lawyer in the Maddocks Tax & Revenue team.
Andrew provides advice on:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Andrew was a tax consultant at a Big 4 Chartered Accounting Firm.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.