The most significant change is the imposition of duty on certain transactions that result in a “change in beneficial ownership” of dutiable property. Revenue NSW has confirmed the following transactions are now dutiable:
- the grant of a put and/or call option
- transfers granting easements
Our initial review of the new provisions and the proposed administration from Revenue NSW discloses that the changes are complex and great care will need to be taken when dealing with put and/or call options as duty triggers may arise at numerous points over the life of a transaction (i.e. grant, transfer and exercise of the put and/or call option).
Grant of an option
Revenue NSW has now included an option granted over dutiable property in NSW (such as over land) is a ‘change in beneficial ownership’. This means that ad valorem duty is payable on any call option fee (consideration) paid for a grant of an option entered into from this date.
The option fee includes GST (if applicable).
Revenue NSW has provided the following example:
Example 1:
The grantee pays an option fee of $20,000 and obtains an option to purchase land from ABC Pty Ltd (the grantor) for $2,000,000.00.
Duty liability:
Duty is payable on the option fee of $20,000 that was paid to the grantor. A grant of an option is a change in beneficial ownership under section 8(1)(b)(ix) of the Duties Act 1997.
From the above example, the duty payable on the $20,000 would be $265 and would be payable within 3 months of the date of the option agreement.
Interestingly, Revenue NSW has also confirmed:
- Surcharge purchaser duty (chapter 2A of the Duties Act 1997) does not apply to transactions that are liable to duty under section 8(1)(b)(ix).
- Premium transfer duty (if applicable) can also apply.
- Duty paid in NSW on the grant of an option is not credited toward the duty payable when the option is exercised.
- If the call option is not exercised, a refund of duty will not be issued for any duty paid for the grant of the option.
- Put option fee does not form part of the consideration.
Essentially this new duty is an additional cost to be carried by the developer.
These provisions are separate to the complex ‘call option assignment duty’ provisions.
Grant of an easement for consideration
The grant of an easement will now be dutiable.
The duty will be the greater of the consideration and the unencumbered value of the easement.
Conclusion
There are now new forms and lodgement requirements for option agreements – Morabito Legal can assist you with these forms and providing some guidance through these new duty provisions.
For any further information regarding this article please call Dominic or Paul on 02 9261 0222 or email dominic@morabitolegal.com.au or paul@morabitolegal.com.au.
