Legal Tip 5: And/or nominee and stamp duty issues

And/or nominee and stamp duty issues


Each State of Australia has separate laws governing stamp duty. The laws differ greatly from state to state too so specific legal advice is needed before entering into any contract.


Some people have promoted the signing of contracts as “xxx and/or nominee” with this supposedly allowing the named person to nominate another entity before completion. This may be possible but it runs the risk of stamp duty being charged twice on the one transaction as it could be treated as a sub-sale from the nominator to the nominee.


This is particularly the case where there was no prior written nomination agreement in place before the person signed the contract and also where the entity was not in existence at the date of the contract. This may occur if the trust is set up after the contract is signed.


Therefore do not enter a contract without obtaining legal advice as getting it wrong can be costly.

 

@Terry_w


is stamp duty payable in below case? (In Vic)


at time of auction : person signs a contract under "personal name and or nominee "

few days later changes to Company name??


I hope answer is no...

 

VIC tends to be lenient with these things. My understanding is that as long as the company had a written nomination agreement with the person on the contract then stamp duty may not be charged twice.

However even if it was treated as a sub sale there may not be any extra stamp duty payable if the company is acting as a trustee of a fixed trust (and all the beneficiaries are relatives of the purchaser) because of s32W

Best to seek your own legal advice asap.

 

I have had to buy as nominee for a client and agree a nominee agreement avoids OSR disputing the change of name and the duty. OSR stamped the agreement so confidence was assurred. Deed of apparent purchaser not that different too

 

Terry as a general rule, are there potential problems where a spouse signs with a nominee clause in the event that the other half can't attend an auction? This is probably the most scenario we see across VIC, NSW & QLD. We've never had it become an issue.

Certainly a nomination to a trustee that isn't established or someone other than a spouse can create issues depending on where the property is.

 

Hi Peter

Generally one spouse can sign the contract and then both can be on the transfer to both end up as being owners of the property. This would attract $10 extra duty in NSW and in VIC would be exempt from duty due to s 32W. Not sure about QLD but if one spouse appointed the other in writing to be their agent prior to signing then it should be exempt under s22.

 

Bidding authority would sort the spouse thing out. And/or nominee doesn't trigger double duty if on a contract of itself, but if you do utilise it then you could be up for double duty, would advise to use deed of rescission if you had to.

 

Could you do a list per state perhaps?

 

A list of?

 

Consequences of using nominee in contract. E.g. some states no consequences at all, some double stamp duty, etc

 

Consequences in all states.

 

Not easy to make such a list as it all depends on a number of factors.
e.g. in QLD If the nominee doesn't provide the deposit it could mean double stamp duty.22(3) of the Duties Act 2001

 

Will there be double stamp duty dispute if:

1. The intention is to have the property purchased under the trust.
2. My conveyancer has advised me to use "XYZ Pty Ltd as Trustee for ABC Trust" as the purchaser name on all contract.
3. I already have an existing company (XYZ Pty Ltd) as trustee for discretionary (ABC) trust well before signing the contract.
4. I made an offer to the property by signing "myself and/or nominee", because the real estate agent suggested to me as I am not able to be present physically to sign "deed of guarantee of contract" to guarantee (myself as guarantor) the company trustee (purchaser) which require a witness.
5. The idea is once the offer has been accepted and signed by the vendor, notify the conveyance to change to "XYZ Pty Ltd as Trustee for ABC Trust".

The situation was rather in a haste, the property was private sale and there were multiple offers to the property. I am not able to come down to meet up with the agent to make the offer in writing. So the agent sent me the soft copy of the contract, printed it out and sign, scanned and return via soft copy.

I guess the real estate agent was not comfortable for me to use the company as trustee as the purchaser over the phone without a deed, so suggested to use "xxx and/or nominee" instead. I was not comfortable either of the idea changing the name in the contract should the offer be accepted, could have double stamp duty implication. I ended up making myself available the next morning to meet the agent in person and sign both the offer ("contract of sale") and "deed of guarantee of contract".

Just wondering how would one make an offer especially when purchasing properties in other states where the company (trustee) is the purchaser not individual and you cannot be physically there?

 

Why take legal advice from a real estate agent? You should be asking your lawyer.

 

can't you find a witness where you live?

 

A great way to ensure you have a double duty risk is to take legal advice from a conveyancer (who lacks qualifications and insurance ?) on the wording of a contract and structuring for a trust transaction. If the trust purpose is so important why not ensure its done properly ? Before any contract is made have the lawyer validate the trust. And advise on the contract.

Take the contract to a real lawyer. They will likely check a few things.... Has deed been settled and trust is in existence? Dated, Stamped. Issues with jurisdiction and the effect on contract etc. Wish I had a dollar for number of trust deeds people have sent me that aren't signed.....You know we just didn't sign it they say. Or they cant find the deed. Or the trust once owned a property and hasn't owned anything for a year or two. Does the trust still exist ? I have seen purchases which are in company trustee name and the validity of a trust is questionable. The owner may then be the company.

 

Thanks for the advice.

 

Okay - I'm planning to bid at an auction this weekend to bid on a property that will be owned by my wife. My wife is overseas so she can't bid herself. I've been advised by my mortgage broker that if I win I can make the purchase as "MY NAME and / or nominee" and then just put the property in my wife's name at time of settlement, with no consequences. Is this correct? We're based in Victoria. Thanks in advance!

 

Plenty of consequences. Why are you tsking legal advice from a mortgage broker and why is he or she giving that advice?

 

Don't tell this to my clients! My clients take advice from a real estate agent all the time...it just so happens I'm also a lawyer.

People don't realise the amount of time and money that would be saved if people took their time and structured the deal correctly to begin with. The unfortunate thing is a wrong structure will usually take longer and cost far more (whether through wasting time with deeds of rescission or if too late, paying double duty) than waiting at the start and seeking advice on the correct structure.

The usual areas I see structured incorrectly are trust purchases (especially SMSF). Put and call option agreements (for Qld at least - can't speak to duty in other States) can also be a good tool if you are unsure of the correct entity but need to do the deal 'now'.