It seems that not a quarter goes by without some change or tweak to regulations and charges relating to real estate and now we have EOFY tax planning decisions needed re stamp duty changes that take effect on July 1, 2018.

While we’re sure you have your tax planning in order, we believe it is important to draw your attention to a couple of major changes to stamp duty affecting some real estate transactions.

I refer to:

  • Further Stamp Duty reductions on commercial property purchases to nil
  • Stamp Duty becoming payable on ANY transfer of a ‘prescribed interest’ in an entity holding local land assets

Let’s do a quick summary of both of these changes.

Stamp Duty disappears – Commercial and Industrial property

On July 1, 2018, the final one third reduction in Stamp Duty will be applied to Qualifying Land, making this date worth noting if you are planning to enter into a purchase Contract.

By delaying until that date, you will benefit from the complete abolition of Stamp Duty, compared to the two-thirds reduction currently in place.

Of course, Qualifying Land has a specific meaning, primarily this is land NOT being used for residential purposes or primary production.

Qualifying land is decided by the Land Use Code and the full list of LUCs is available in this PDF.

Please make sure you talk to us or your conveyancer as soon as possible because much rides on the date that is entered into the Contract, and not the date of the Memorandum of Transfer or the date that settlement takes place.

The end of Stamp Duty exemption for transfers of a ‘prescribed interest’ in an entity holding local land assets

As things currently stand, a transfer of a ‘prescribed interest’ in an entity holding local land assets with an unencumbered value of less than $1 million is exempt from stamp duty.

However, from July 1, 2018, the $1 million threshold will be removed, and any transfer of a ‘prescribed interest’ in an entity holding local land assets, no matter what value, will be subject to stamp duty.

A ‘prescribed interest’ can include:

  • an interest in a private company or private unit trust of 50% or more
  • an interest in a listed company or public unit trust of 90% or more

For example, let’s assume Company X owns a development site with an unencumbered value of $750,000.

Until now, should Shareholder A wish to transfer their 50% shareholding to Shareholder B, no stamp duty would have been incurred.

However, as of 1 July 2018, the transfer of Shareholder A’s 50% shareholding to Shareholder B WILL incur stamp duty on the unencumbered value of $375,000 (being 50% of the unencumbered land value).

If you need help structuring, and preparing share or unit sale agreements, talk to the Eckermann Group because Eckermann Lawyers has the expertise to guide you through the structuring and transfer process.


Image: Cat + Mouse by Denis Defreyne via Flickr. CC BY 2.0