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Legal Tip 10: Aggregation of Stamp duty

Discussion in 'Legal Issues' started by Terry_w, 28th Jun, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Aggregation of Stamp duty


    Most States in Australia have special laws around stamp duty to allow for transactions to be aggregated together - which means more stamp duty will be payable.


    An example is buying 2 or more units in the one complex. If they were say $500,000 each the NSW stamp duty on the transfer of land would be $17,990 each or $35,980 combined. But with the laws of NSW the combined purchase would be assessed so you would be charged stamp duty on the $1,000,000 in total which would be $40,490. This means an extra $4,510 in duty.


    There is also provision in NSW and VIC (and other states) so that transactions up to 12 months apart can be aggregated. NSW even goes a step further to cause associated persons to be aggregated. A person is an associate person they meet one or more of 8 listed criteria such as be related, having a majority shareholding in a company (the company and the shareholder will be related), trustees will be related persons to beneficiaries, etc.


    Examples


    John buys a unit in complex A in NSW. He gets good returns so he buys another unit downstairs 11 months later. This could be aggregated.


    John hears about the aggregation so he gets his wife to buy the second unit - both John’s purchase and his wife’s purchase could be aggregated.


    John says bugger this, I will just set up a company to buy it. Both transactions can still be aggregated if John or his wife own the majority of the shares in the company.


    John says this is flippin ridiculous, i will just buy the property next door instead - same thing could apply.


    Legislation

    s25 Duties Act 1997 (NSW)

    http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s25.html


    S 24 Duties Act 2000 (VIC)

    http://www5.austlii.edu.au/au/legis/vic/consol_act/da200093/s24.html
     
    Brady, TMNT, SerenityNow and 2 others like this.
  2. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    I didn't know about this till you shared. Thanks Terry.
     
  3. Beelzebub

    Beelzebub Well-Known Member

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    So, just to clarify, it's two purchases in a 12 month period and not two purchases in a financial year? I can't buy in June and then again in August?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    12 months in NSW. But not all transactions will be aggregated.

     
  5. teetotal

    teetotal Well-Known Member

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    poor John !!
     
  6. SerenityNow

    SerenityNow Well-Known Member

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    Had a quick skim of the Vic rules. Bottom line, if I wish to minimize stamp duties, I should space my purchases 12+ months apart? Unless I fear a rapidly rising market (possibly past that stage in vic) and wish to enter; or I think the extra 1% spent in stamp duties is worth the addition CG and tax benefits (possibly my case)
     
  7. York

    York Finance Broker Business Member

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    @Terry_w your final example mentions John wanting to buy the place next door where aggregation 'could' take place. What determines this? Is there a clear set of guidelines? I understand the 2 units in one complex. But if the property next door?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Legilsation determines this.

    If nsw see s25 Duties act
    subsection (1) outlines when it will apply and then ss (s) says it won't apply if...
    DUTIES ACT 1997 - SECT 25 Aggregation of dutiable transactions
     
  9. York

    York Finance Broker Business Member

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    Do all the subsections under (1) need to be satisfied for the duty to he payable. ie - (a) to (c)? I think that (c) says the transactions must be effectively 'one arrangement'. So does this mean if there is no connection then aggregation may be avoided?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    See the word 'and' at the end of each subsection a, ab, and b - that means all must be satisfied. Incidently, where there is a odd number in there that usually means an extra subsection was inserted later - ab in this case.

    (a) they occur within 12 months, and
    (ab)
    the transferor is the same or the transferors are associated persons, and
    (b) the transferee is the same or the transferees are associated persons, and
    (c) the dutiable transactions together form, evidence, give effect to or arise from what is, substantially, one arrangement relating to all of the items or parts of, or interests in, the dutiable property
     
  11. York

    York Finance Broker Business Member

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    My quote was unfinished. I fixed it above. a,b, ab - I understand. But c refers to 'one arrangement'. So that means if the 2 transactions aren't connected then no duty is payable. Is that right?
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You would have to consider the meaning of 'one arrangement'.
     
  13. York

    York Finance Broker Business Member

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    Fair enough ..i thought so. .thanks Terry
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    And to do that you would need to look at any OSR rulings and/or case law.
     
  15. York

    York Finance Broker Business Member

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    OSR Ruling Number DUT 036 breaks this down with further detail. Summarised, it seems that if you intentionally made purchases to 'associate' the multiple properties whether now or in the future, this would be considered 'one arrangement'. Example - putting in a DA with council that involves the properties in question, having a single loan facility for the properties, buying multiple attached blocks etc.
     
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  16. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    @York I would say in one arrangement also takes into account when owners of 4 side by side blocks put it up for sale and even though it would be 4 contracts of sale it is effectively one sale and stamp duty done on the whole amount.
     
  17. Cactus

    Cactus Well-Known Member

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    I got aggregated on two purchases recently was not expecting it. I was told the only way around it was to have a builders license.
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There are concessions for buildings building, but just holding licence is not sufficient in NSW

    DUTIES ACT 1997 - SECT 25 Aggregation of dutiable transactions
    s25
    ss(2) Dutiable transactions are not to be aggregated under this section if the Chief Commissioner is satisfied that:
    (a) the dutiable property to which the transactions relate are comprised of separate allotments of vacant land, and
    (b) the transferee is a person authorised to contract to do residential building work under the Home Building Act 1989 , and
    (c) the transferee intends to construct residential premises on the allotments for the purposes of sale to the public.
     
  19. Cactus

    Cactus Well-Known Member

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    Sorry should have said VIC and vacant land to be built in.