The States and Territories committed to a time-line for the abolition of various state taxes and duties as part of the introduction of the GST and in return for the Commonwealth's commitment to distribute GST revenue to them. All states and territories have abolished duty on listed shares (marketable securities), with other duties in various stages of abolition.

From 1 January 2009 a new Intergovernmental Agreement on Federal Financial Relations took effect. Under this agreement, 1 July 2013 is the ultimate deadline for the abolition of any remaining duties on the transfer of non-land business assets, non-quotable marketable securities, leases, mortgages and other loan securities, credit arrangements, instalment purchase arrangements and rental arrangements, cheques, bills of exchange and promissory notes.

The latest state and territory budgets were handed down in May and June this year and many budgets pushed back abolition dates to take advantage of the new deadline. With the global financial crisis and many State and Territory governments feeling the pinch, there is a clear reluctance to give up many State taxes and rely on the GST revenue. The recent re-introduction of lease duty in Victoria and changes in NSW to land rich duty and mortgage duty highlight this trend. These changes are summarised below, followed by a round-up of all State and Territory budgets.

Victoria – Duty re-introduced on leases

The controversial Duties Amendment Act 2009 (Vic) is now law. It introduces changes, which apply retrospectively from 21 November 2008, so that the following transactions are now dutiable transactions in Victoria:

  • "the granting of a lease for which any consideration other than the rent reserved is paid or agreed to be paid";
  • "the transfer or assignment of a lease for which any consideration is paid or agreed to be paid" (irrespective of whether a lease premium was paid on the initial grant of the lease); and
  • "the surrender of dutiable property" (including a lease of a kind referred to in the above dutiable transactions).

Where one of the above dutiable transactions occurs, duty will be payable on the greater of the consideration (other than the rent reserved that is paid or agreed to be paid) and the unencumbered value of the land that is the subject of the lease.

Click here to view our full update on this change.

New South Wales – Land Rich Duty Changes

On 17 June 2009, the NSW Government released draft legislation giving effect to the major changes to land rich duty announced in the NSW mini-budget of 11 November 2008. The changes will mostly apply from 1 July 2009. The most significant are:

  • the land ratio test will be removed. That is, land-rich duty will apply to acquisitions of "significant interests" in landholders that breach the land value test (i.e. hold NSW land with an unencumbered value of $2m or more regardless of how valuable non-land assets are);
  • the 20% acquisition threshold for private unit trusts will be lifted to 50%, which will align it with the acquisition threshold for private companies;
  • the land-holder provisions will be extended to apply to public unit trusts and listed companies, but with some concessions, such as a 90% acquisition threshold and a lower rate of duty; and
  • the introduction of a general anti-avoidance provision.

Click here to read our full update on these new measures.

New South Wales – Changes to Mortgage Duty

On 17 June 2009, major changes to mortgage duty were also announced, to apply from 1 July 2009. The changes will apply to mortgages where a liability for mortgage duty arises on or after 1 July 2009. The changes will also apply to existing mortgages where a further advance is made on or after 1 July 2009 and before 1 July 2012 (when mortgage duty is scheduled to be abolished). The major changes are:

  • Limited mortgages will no longer be effective due to changes in the way the "amount secured by the mortgage" must be calculated;
  • a new method applies to calculate mortgage duty on further advances which may result in an increase in duty where the proportion of NSW secured property increases between the date of the original and further advance; and
  • changes to the "mortgage package" provisions, which could result in additional mortgage duty where the NSW proportion of secured property has increased since the advances under the original mortgage, even if no further advance is made in connection with the new mortgage.

Click here to read our full update on these measures.

A summary of the various state and territory budgets, and the abolition of the remaining duties follows.

State/Territory and Budget date Major Budget announcements Duty on transfers of unquoted marketable securites? Duty on transfer of non-real business assets? Abolition of other duties?
New South Wales
16 June 2009		 A reduction in payroll tax to 5.5 per cent, starting with a reduction to 5.75 per cent from 1 January 2009, with further reductions to 5.65 per cent from 1 January 2010 and to 5.5 per cent from 1 January 2011.

Bringing forward the abolition of transfer duty on non-land business assets from 1 July 2012 to 1 January 2011.		 Yes, due to be abolished 1 July 2012. Yes, due to be abolished 1 January 2011. New South Wales is currently the only jurisdiction to charge duty on mortgages, and the latest abolition date for this is 1 July 2012. The latest changes to mortgage duty in NSW are canvassed above.
ACT
5 May 2009		 The Budget confirmed the abolition of lease duty on 1 July 2009 and the abolition of duty on unquoted marketable securities on 1 July 2010. Yes, due to be abolished 1 July, 2010. No, abolished 2006. Although lease duty was abolished in ACT on 1 July 2009, long term franchise agreements and leases are dutiable and accordingly transfers of goods with such transactions are also caught.
South Australia
4 June 2009		 The 2009 Budget confirmed that remaining rental and mortgage duty would be abolished from 1 July 2009 and that, from 1 July 2009 the payroll tax rate would be reduced to 4.95 per cent and the threshold increased from $552 000 to $600 000.

The 2009 Budget also announced land tax relief for Commonwealth approved, residential aged care facilities, effective from 2009-10.		 Yes, due to be abolished 1 July 2012, deferred from a previous schedule of 50% abolition on 1 July 2009 and 100% abolition on 1 July 2010. Yes, due to be abolished 1 July 2012. Rental duty has been abolished in all States and Territories and was abolished in SA on 1 July 2009. Mortgage duty was also abolished in SA from 1 July 2009.
Queensland
16 June 2009		 Budget announcement said "In light of the tighter fiscal conditions, duty on the transfer of core business assets will now be abolished by 1 July 2013".

Budget also included further first home buyer incentives for purchase of vacant land, payroll tax incentives for employers of apprentices and trainees and an instalment payment option for land tax.		 No, abolished 1 January 2007 Yes, due to be abolished 1 July 2013  
Northern Territory Stamp duty on the non-land component of business conveyances was originally scheduled for abolition from 1 July 2009. However, this has been deferred until 1 July 2012.

Payroll tax is currently 5.9 per cent. The Government has committed to reducing the payroll tax rate to 5.5 per cent in 2012.		 No, abolished 1 July 2006. Yes, due to be abolished 1 July 2012. The transfer or surrender of a franchise agreement is dutiable in NT.
NT recently changed its stamp duty landholder regime to impose stamp duty on takeovers of listed entities. See above for a discussion of how NSW has followed suit with its recent land rich duty changes.
Western Australia
14 May 2009		 The budget included announcements of a one-off pay roll tax rebate for small and medium businesses, a cap on the growth in land values for land tax purposes, an extension of time to pay land tax and a land tax concession for property developers. No, abolished 1 January 2004. Yes, due to be abolished 1 July 2010. Western Australia also uses a landholder rather than land rich model for land rich duty and imposes duty on takeovers of listed entities. Its provisions formed the model for the new New South Wales landholder model (see above).
Victoria
5 May 2009		 As set out above, Victoria re-introduced duty on leases from 21 November 2008 where consideration "other than the rent reserved" is payable under the lease. The Victorian budget described this as an anti-avoidance measure not expected to generate significant extra revenue. No, abolished 1 July 2002. No, never had (other than when in conjunction with another dutiable transaction) Lease duty has been abolished in all States and Territories, but lease premiums and amounts payable for the transfer and surrender of leases remain dutiable in most jurisdictions.
Tasmania
11 June 2009		 The budget contained announcements of a payroll tax rebate until 30 June 2011 for any new jobs created during the period 11 June 2009 to 30 June 2010.and abolition of duty on agreements for sale from 1 July 2009, simplifying the treatment of duty on conditional and off-the-plan sales. No, abolished 1 July 2002. No, abolished 1 July 2008. An anomaly in Tasmania is that transfers of goods can attract duty when in conjunction with a transfer or surrender of lease.

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.