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

I thinkntje average person actually thinks a real estate agent or a broker can advise in this area and thatnthey know what theyy are talking about when they do.

Dangerous to both the person giving and recieving the advice

 

What's the correct/legal way of negotiating/signing contract on someone's behalf when the other party is overseas and can't attend to the matter in a timely manner? The time frames I am talking are are between initial offer and 3 to 4 weeks when the the other party goes on the contract and the signing party drops out?

 

A power of attorney.

 

Example (NSW) to demonstrate some of the complexity. ....

In NSW a nominee clause may still attract fixed $10 Duty on top of the transfer duty. Its not just a case of ignoring the issue and changing names like many think how nominees provisions work. Failure to pay the $10 duty may trigger the double duty provisions.

Revenue Ruling No. DUT 010 Version 2 | Revenue NSW

Clause 11 is a nice one...Its simple

A transfer will not be in conformity with an agreement in the following circumstances.

1. An agreement with a purchaser acting on behalf of a company to be formed, where the company is not named or identified, and where there is no novation. The transfer to the company will be liable to ad valorem duty.
   
   
2. An agreement that is expressed to be with a purchaser or nominee of the purchaser, and the nominee is not identified in any way. A transfer to any person other than the named purchaser will be liable to ad valorem duty unless section 18 (3) applies.

Def : Ad Valorem .... (Latin for "according to value") is a tax whose amount is based on the value of a transaction or of property

If you cant clearly understand all of the Ruling (eg what is novation ?) and its application to your position then legal advice is a must. Note the related persons safeguards may assist. But not your best mate.

 

Another case
Chrissie Group Pty Ltd atf All Angels Family Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 77
Chrissie Group Pty Ltd atf All Angels Family Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 77 (9 April 2018)

Individual signed contract, paid stamp duty and then nominated the trustee company of a discretionary trust for settlement. Full duty was levied again.

Double duty was paid because of the nomination.

 

In VIC, do we still need to put the "and/or nominee" clause next to the purchaser's name given General Condition 18:

18. NOMINEE
The purchaser may nominate a substitute or additional transferee, but the named purchaser remains personally liable for the due performance of all the purchaser's obligations under this contract.

 

Seek legal advice. This is just a clause in the contract - which would apply anyway, even if not in the contract.

 

I'm considering going through a nomination sale for an off the plan property. The property is completed already but has not settled as the original purchaser cannot settle due to changed financial circumstances.

The contract was signed October 2016 for $1,050,000 and so was eligible for stamp duty concessions. The agent said that the stamp duty on this will be circa $18-$23k. A deposit of 10% was left with balance of $945k to be paid on settlement.

Under the nominated contract, my purchase price will be ~$900k (lower than the settlement balance).

I want to be sure that under the nomination contract that I will be entitled to the stamp duty savings however, their solicitor seems hesitant to commit to the stamp duty amount as they claim this is all subject to SRO accepting their stamp duty calculation.

In the additional terms of the contract, they have agreed to the term 'subject to my solicitor agreeing to the stamp duty amount.' This doesn't eliminate the risk of the full stamp being charged but does minimise the risk.

Is this a standard issue in nomination contracts? Is there a way we can mitigate the risk such that the stamp duty amount is certain and under the $23k stamp duty?

Thanks in advance.

 

Yes and Yes

 

And if double duty could apply there is scope for GST issues.

 

Could rescinding the original contract work, then resigning with the new entity?

The contract was signed "and or nominee" but the entity which will be nominated did not exist at contract signing.

This was a non VIC state, which seems to be the only state where nomination is airtight.

 

this is something that you need legal advice on as it would result in double duty.

Nomination is not 'airtight' in VIC - not sure what that means but I advise against planning to nominate a new entity in vic, generally

 

I'm not sure how double duty would be applicable if you have both parties sign a 'deed of rescission' for the original contract.

But yes, I'll advise they seek proper advice from a qualified professional.

 

anti-avoidance provisions