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Legal Tip 18: Mortgage Stamp Duty (focusing on NSW)

Discussion in 'Legal Issues' started by Terry_w, 6th Jul, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Mortgage Stamp Duty (focusing on NSW)


    In NSW there is duty payable on mortgages. Most people think it is abolished, but it is still around unfortunately.


    However there is an exception for someone who is

    1. a natural person, and is

    2. purchasing land (a property)
    So it won't apply to most people.

    There are 2 main reasons where people get caught with having to pay duty:

    1. A company is the mortgagor which usually means the company is the borrower, and/or

    2. where a person is borrowing without the purchase of a property. This can happen when setting up a line of credit (LOC) or releasing equity by borrowing to park money in an offset account (avoid this if possible) or pay back into the loan.

    Stamp duty is administered by the OSR but usually collected by the banks when doing the loan. Often they miss the collection of the duty on the LOC set up, but that doesn’t mean the person borrowing is not liable. Tax is self assessment so you should offer to pay the tax to the OSR where they have missed it.


    But where a person has paid stamp duty on a LOC type loan and the funds are later used to acquire a property the duty in this case can be refunded by the OSR if an application is made with proof.
     
  2. Chilliblue

    Chilliblue Well-Known Member

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    Thanks Terry
     
  3. shelleykins

    shelleykins Well-Known Member

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    Thanks Terry. So does that mean if I refinance a loan and draw out $100000 as a second/sub loan and put it into an offset account while waiting to purchase the next property that I would need to pay duty on that $100k? If so, how much would I need to pay?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Technically yes.

    For the calculations see
    https://www.apps08.osr.nsw.gov.au/erevenue/calculators/mortgagesimple.php#anc_calc

    For $100,000 it would be about $341
    .
     
  5. shelleykins

    shelleykins Well-Known Member

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    Thanks Terry I really had no idea about that.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Most people don't, including mortgage brokers who deal with loans every day of the week. I had to explain this to a major aggregator as their software for brokers estimating costs for clients didn't include this. Their response was that they had no idea about it and it would be too costly to implement.
     
  7. shelleykins

    shelleykins Well-Known Member

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    Reassuring!o_O
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    TaylorChang likes this.