On 11 November 2008, the NSW Government released its much anticipated mini-budget. The mini-budget contains significant changes to stamp duty and land tax. In particular, the deferral of the abolition of mortgage duty and marketable securities duty may have significant ramifications for transactions planned to take place in 2009.

Deferred Abolition of Duties

The NSW Government had previously legislated that:

  • unquoted marketable securities duty would be abolished from 1 January 2009
  • mortgage duty on business loans would be abolished from 1 July 2009 (mortgage duty has already been abolished on mortgages for owner occupied housing and investment housing), and
  • transfer duty on non-land business assets would be abolished from 1 January 2011.

The NSW mini-budget defers the abolition of these duties until 1 July 2012.

Land rich duty

'Land rich' duty is currently imposed in NSW if a person acquires a 'significant interest' in a private company (50% or more) or a private unit trust (20% or more) and that entity has land in NSW with an unencumbered value of $2 million or more (land value test) and 60% or more of its property is land (land proportion test).

From 1 July 2009, a 'landholder model' will be introduced to replace the land rich duty provisions.

The Government notes in the NSW mini-budget that Western Australia, the Northern Territory, the ACT and Queensland (for trusts only) have already moved to adopt 'landholder models' that impose transfer duty on acquisitions of significant interests in entities that own land above a certain threshold (i.e. these models do not contain a 'land proportion test'). The NSW mini-budget states that the introduction of this model in NSW will eliminate the need for complex valuations and calculations and provide increased tax harmonisation between NSW and those other jurisdictions.

The precise details of the 'landholder model' to be introduced in NSW have not been announced. The Government states in the NSW mini-budget that it will undertake consultation with industry regarding the new model which will not be introduced until 1 July 2009.

Nominal duties

From 1 January 2009, a range of nominal duties will be increased. The Government states in the NSW mini-budget that nominal duties on a range of documents such as duplicates of stamped documents, collateral mortgages, deeds appointing substitute trustees and transfers of property under a will are to be increased from $2 to $10 and from $10 to $50. Nominal duty on trust deeds will increase from $200 to $500.

Land Tax

For the 2009 land tax year, taxpayers with taxable land holdings above $2.25 million will pay a premium land tax rate of 2% on taxable land holdings in excess of $2.25 million. Land holdings below this amount will be subject to the current 1.6% rate.

What does the NSW mini-budget mean for you?

Taxpayers planning transactions in anticipation of the abolition of mortgage duty and marketable securities duty in 2009 may need to revisit their plans and reassess the stamp duty implications.

The introduction of a 'landholder regime' may provide an incentive for some taxpayers to undertake transactions prior to the new rules being introduced on 1 July 2009 or to defer transactions until after that time.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.