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Duties Amendment Bill 2009
NOTES ON CLAUSES
Clause 1 Short title.
Clause 2 Provides for the Act to commence on 1 July 2009.
Clause 3 Defines the Duties Act 2001 as being the Principal Act.
Clause 4 Amends section 6(1)(b) of the Principal Act to abolish duty on
agreements for sale by deleting subparagraph (i) and inserting a
new subparagraph (v) that will impose duty on any other transaction
that results in a change of beneficial ownership of dutiable property.
The new provision is for anti-avoidance purposes to enable the
capture for duty of transactions such as partnership agreements that
may effect a change in beneficial ownership of dutiable property.
Clause 5 Amends section7(2) of the Principal Act by removing agreements for
sale or transfer from the table of dutiable transactions and inserting
a new item for any other transaction that results in a change of
beneficial ownership of dutiable property. This provision will deem
any other transaction that results in a change of beneficial
ownership as a transfer of dutiable property.
Clause 6 Amends section 10 of the Principal Act to substitute a new provision
for when the liability to duty arises. The new wording is to be
uniform with that of the Victorian Duties Act 2000 equivalent
provision which provides that duty liability arises at the time of the
transaction.
Clause 7 Amends section 16 of the Principal Act to remove the conformity
concessions that are no longer required as agreements for sale are
no longer dutiable. The new wording is to be uniform with the
Victorian Duties Act 2000 equivalent provision and provides for
electronic transactions.
Clause 8 Amends section 19 of the Principal Act by repealing sub-sections
19(2) and 19(3). Sub-section 19(2) is no longer required as it
relates to uncompleted agreements for sale. Sub-section 19(3) is no
longer required as it relates to goodwill of a business and goodwill of
a business is no longer dutiable property since 2008.
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Clause 9 Amends section 20 of the Principal Act by replacing the definition of
unencumbered value to conform with the Victorian equivalent. The
new definition also enables the value to be calculated by reference
to the date of the agreement for sale rather than the resulting
transfer. This means a taxpayers liability is calculated on the date
they enter into the agreement for sale. This means that if the value
of the property changes significantly between the date of entering
into the agreement and the date of settlement and transfer, the
taxpayer is not disadvantaged.
Clause 10 Amends section 22 of the Principal Act by amending the
aggregation of dutiable transaction provisions that are designed to
ensure that taxpayers do not avoid higher duty rates by splitting
larger transactions into a series of smaller transactions. The
amended provisions ensure that taxpayers do not enter into a series
of agreements for sale to avoid duty.
Clause 11 Amends section 27 of the Principal Act by amending the wording to
ensure that transfers rather than agreements are the liable
instruments. This provision provides a concession to taxpayers that
enter into an agreement for sale that is subsequently amended so
that the taxpayer only pays duty on the property transferred by the
amended agreement not what was originally agreed to be
transferred.
Clause 12 Amends the Principal Act by repealing sections 32 and 33. Section
32 was a concession for "off the plan" agreements for sale whereby
the purchaser was granted an extension of time of up to 12 months
or completion of the agreement. Section 33 provided for the refund
of duty paid on cancelled agreements. As this Act abolishes duty on
agreements for sale these sections are no longer required.
Clause 13 Amends the Principal Act by repealing the existing section 34 and
inserting the substituted wording. The substituted section 34
removes references to the previously abolished mortgage duty
provisions.
Clause 14 Amends the Principal Act by inserting a new Part 4A to chapter 2.
This new part is to contain anti-avoidance provisions for persons
acquiring interests in dutiable property by means of a sub-sale of
the agreement rather than by transfer of the dutiable property. They
are required to prevent leakage of the duty base as a result of the
abolition of duty on agreements for sale. These provisions are
modelled on the Victorian equivalent part 4A of their Duties Act
2000.
Heading Amends Principal Act by inserting new heading for a new Part 4A.
This heading and the new Part 4A of the Principal Act are uniform
with the Victorian equivalent.
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Clause 36A Amends the Principal Act by inserting a new section 36A of the
Principal Act that defines the terms used in part 4A . These
definitions are required to define the forms of transactions and types
of persons that are subject to the anti-avoidance provisions. These
definitions are listed under this Part for the convenience of
taxpayers and because these defined terms only apply to this new
Part 4A.
Clause 36B Amends the Principal Act by inserting a new section 36B. This
clause describes the types of transactions captured by the anti-
avoidance provisions in Part 4A. The new section 36B applies duty
to a "transfer right" which is a right a third party (defined as a
subsequent purchaser) who, for additional consideration (eg
payment) obtains from a purchaser in an uncompleted agreement
for sale the right to take title to the property on completion. This is
more commonly known as a sub-sale of property and because the
original purchaser does not necessarily have the title transferred
without these provisions the original purchaser who sold their
interest in the property through the agreement would avoid duty.
The new section 36B will impose duty on all subsequent
transactions that occur on a property that is subject to an
uncompleted agreement. The provision defines additional
consideration as any consideration paid to either the original
purchaser or their associates.
Clause 36C Amends the Principal Act by inserting a new section 36C. The new
section 36C charges the final transfer of a property that has been
subject to a subsequent transaction (sub-sale) with separate and
distinct duty for every subsequent transaction that has occurred.
This section charges duty on the original agreement for sale of the
property and then the subsequent transactions that may have
occurred. The rate of duty charged on the agreement and
subsequent transactions is the same rate as applied to a standard
transfer of the property as set out in part 3 of chapter 2 of the
Principal Act.
This section does not apply duty to transactions whereby a person
completes an agreement and takes title without further
consideration (payment) as this is not seen as a sub-sale merely the
completion of the original transaction from which the original
agreement was derived. For example if a person enters into a
contract in their own name and completes it in the name of their
company, family trust or a relative, no further duty is payable unless
that person paid for the right to complete (eg a sub-sale).
4
Clause 36D Amends the Principal Act by inserting a new section 36D of the
Principal Act. The new section 36D describes how the dutiable
value of the original sale agreement and subsequent transactions
are calculated. The new section provides that duty is calculated on
the original agreement and each subsequent transaction on the
greater of the consideration paid or the market value. These
provisions mirror the method of calculating the dutiable value
contained in section 20 as applied to a normal transfer. The new
provisions rely on the market value being the value the property
would achieve on the open market. In default of this the
Commissioner may refer to the Government Valuation as calculated
by section 248 or obtain a valuation under section 247.
Clause 36E Amends the Principal Act by inserting a new section 36E. The new
section 36E provides that duty becomes payable on agreements for
sale and subsequent transactions under this Part are payable at the
time of transfer of the property. This conforms with the provisions
applicable to normal transfers under Chapter 2 of the Principal Act
that provide duty is payable at time to transfer. This means that
payment only becomes liable at completion of the transaction(s).
Clause 36F Amends the Principal Act by inserting a new section 36F. This
section imposes the liability to pay duty on the purchaser and
subsequent purchaser. As the final transfer is the instrument to be
stamped with the duty, this section allows a power of recovery, for
the final transferee to collect the duty from the other purchasers paid
by them for the chain of transactions effected by the transfer and the
prior agreements and sub-sales.
Clause 36G Amends the Principal Act by inserting a new section 36B. This
clause enables the application of the exemptions and concessions
provided for in the other Parts of Chapter 2 of the Principal Act to
the sub-sale transactions captured under this Part. This will prevent
inconsistent treatment between the anti-avoidance transactions with
a normal transfer that may be subject to a concession or exemption.
Clause 36H Amends the Principal Act by inserting a new section 36H. The new
section 36H defines what is the consideration for a transaction
under this part and mirrors the equivalent provision applied to the
rest of Chapter 2 of the Principal Act.
5
Clause 36I Amends the Principal Act by inserting a new section 36I. The new
section 36I empowers the Commissioner to require the transferee of
the final transfer that was subject to a sub-sale and these provisions
to provide a statutory declaration providing the information needed
to calculate the duty payable. This provision is aimed at ensuring
that taxpayers comply with these provisions by ensuring they are
compelled to declare when a sub-sale occurs. It also provides a
statutory compunction for transferees who are aware that a
transaction that is not otherwise recorded on the land registry to
provide information on the transactions.
Clause 15 Amends the Principal Act by repealing section 54. Section 54
provided a concession for agreements for sale under the Homes Act
1935 that duty was not payable on these agreements until transfer.
This concession is no longer required as duty will only be payable
on transfer.
Clause 16 Amends section 91 of the Principal Act by substituting the wording
provided. Section 91 relates to the anti-avoidance provisions for put
and call option agreements. The new amendments in this clause
will deem a put and call option agreement to be a transfer rather
than an agreement for sale.
Clause 17 Amends the Principal Act by inserting a new section 259B to the
Principal Act. The new section 259B provides for the transitional
arrangements for the new amendments in this Bill. This section will
retain the obligation to pay duty under the former provisions for
matters entered into before commencement. Transactions entered
into after the commencement will be subject to the new provisions.