Hi guys Buying a property via family. I have a Valuation for Stamp Duty. I will buy at that price but intend settling in two years. Will stamp duty be charged at the valuation at time of contract signing or will I need to get a new Valuation done at settlement? Are there any legal issues to having a contract out that long? Ta Simon
In NSW, the liability for duty arises on entry into the Contract for Sale of Land, ie exchange. Therefore, no need to get a valuation done at settlement. In terms of legal issues, in most if not all instances, interest accrues on the duty payable if it is not paid within three months from the date of exchange. Many family conveyancing matters are handled without a contract and can be referred to as non-contractual transfers. Duty in this instance would be paid on the date of the transfer so you would need a new valuation at that time. It does mean that you don't pay stamp duty until settlement but also means that you don't have the security of a contract to ensure that the property is not sold to someone else. A possible method to defer the liability for stamp duty would be by way of an option agreement.
OK The vendor doesn’t want a valuation done in two years time as any increase will affect pension entitlements. So, even though it is a family transaction we could still use a contract and end up with the result I am after?
Yes - you will however need to pay stamp duty within three months of entry into Contract to avoid interest. There is no need to get a valuation in two years. Value for stamp duty purposes is relevant as at the Contract date and not the settlement date.
If the buyer has a stamp duty exemption does that also apply to the interest? Really appreciate the advice.
If you have an exemption from duty then there is no duty on which interest will accrue. If however you are paying a concessional amount of duty, and you don't pay within three months, then interest will apply on the concessional amount of duty payable.
The vendor needs to determine their CGT position as the contract date is the CGT event date. The deferred period of two years does have a special process so tax doesnt have to be paid (if its not eligible for a 100% exemption for CGT) until the actual settlement occurs. Its a undocumented ATO process which even many tax advisers arent familiar with.
