Like most South Australians during the week, we paid close attention to the State Budget handed down by Tom Koutsantonis, especially as it related to real estate and property transactions.
From our position as the largest conveyancing firm in South Australia, we have distilled the following summary to give you an overview of the various budgetary measures from a conveyancer’s perspective.
While this isn’t an exhaustive review, I believe it covers the most important points for our clients and for anybody embarking on transactions involving the transfer of businesses or real estate in South Australia.
The SA State Budget summary of property and non-property related taxation measures
The following property and non-property related taxation measures were announced by the Government as part of the 2015-16 State Budget, handed down on June 18, 2015.
Measures effective immediately:
- Abolition of stamp duty on non-real property transfers
- Abolition of stamp duty on non-quoted marketable securities
- Expansion of the availability of corporate reconstruction relief
- Expansion of the stamp duty concession for exploration tenements to include retention tenements
- Introduction of a stamp duty exemption for a principal place of residence transferred into a Special Disability Trust for no consideration
- Removal of the exemption available in relation to the partition of property between members of a family group
Measures starting on July 1, 2015:
- Abolition of the Hindmarsh Island Bridge Levy
- Extension of the small business payroll tax rebate to 2015-16
- Introduction of a land tax principal place of residence exemption for property transferred into a Special Disability Trust
- Other land tax amendments
Measures to take effect from the date of assent (assent date to be confirmed):
- Expand the stamp duty exemption for interfamilial farm transfers, in particular in relation to transfers involving the use of certain types of trusts
- Legislate ex gratia relief for incapacitated persons
- Legislate ex gratia relief for disability service providers
- Legislate ex gratia relief for charitable and religious purposes
- Extend the definition of family group to include domestic partners
- Retrospective date of sale amendments
- Payment of tax on appeal
Measures starting July 1, 2016:
- One third reduction of conveyance duty on non-residential, non-primary production real property transfers
Measures starting July 1, 2017:
- Further one third reduction of conveyance duty on non-residential, non-primary production real property transfers
Measures starting July 1, 2018:
- Abolition of conveyance duty on non-residential, non-primary production real property transfers
- Abolition of stamp duty on transfer of units in a unit trust
- Removal of the $1 million landholder threshold
Among this list of changes, quite a few are property-related and I will expand and comment on them below.
Abolition of stamp duty on non-real property transfers
As of Budget day, June 18, 2015, stamp duty on transfers of non-real property was abolished in South Australia.
The term, non-real property, relates to property that is not land and buildings, and includes items like:
- plant and equipment that are not fixed to land
- goodwill
- intellectual property
- receivables
- transfers of statutory leases and licences, such as
- fishing licences
- taxi licences
- gaming machine licences and entitlements
This is great news for business owners and prospective business purchasers because it now means there is no stamp duty payable at all on the purchase of a business and the business’ assets including plant and equipment.
From our experience dealing with Vendors and Purchasers, we believe it will remove one substantial barrier for purchasers wanting to purchase an existing business and will surely provide a larger market to business owners looking to sell their business.
This is a great move and is to be applauded.
Phased out stamp duty on non-residential (commercial) property transfers
To understand this change, I can’t do better than this passage taken from the Revenue SA Circular 76:
Stamp duty rates will be reduced by one-third from 1 July 2016, a further third from 1 July 2017, before the duty is abolished from 1 July 2018.
Stamp duty on transfers of residential and primary production land will remain unchanged. A stamp duty exemption may be available to certain transfers of residential or primary production land (e.g. when primary production land is used to carry on a business and is transferred between family members).
Land will be taken to be used for residential purposes where the Commissioner of State Taxation, after taking into account information provided by the Valuer-General, determines that:
- it is being predominantly used for that purpose; although the land is not being used for any particular purpose at the relevant time the land should be taken to be used for residential purposes due to improvements that are residential in character having been made to the land; or
- that the land is vacant, or vacant with only minor improvements, that the land is within a zone established by a Development Plan under theDevelopment Act 1993 that envisages the use, or potential use, of the land as residential, and that the land should be taken to be used for residential purposes due to that zoning (subject to the qualification that if the zoning of the land indicates that the land could, in a manner consistent with the Development Plan, be used for some other purpose (other than for primary production) then the vacant land will not be taken to be used for residential purposes).
The Commissioner will generally rely on land use codes to determine whether he considers land to be residential or primary production land. In some cases the zoning of the land will be relevant where the land is unimproved or there are only minor improvements.
A further exception is in relation to land which although coded as residential by the Valuer-General will nevertheless be considered by the Commissioner to be commercial in nature. This treatment will be consistent with the Local Government zoning of the land. Examples of land that falls into this category include Hotels, Motels, Serviced Apartments and short term unit accommodation.
Again, I believe we must applaud the Government for this move because stamp duty is a huge barrier to commercial property sales given that commercial properties largely sell for much more than standard residential properties.
Currently a sale of a commercial property for $5m attracts a stamp duty payment of $268,830 which is a large amount of money and is likely to put off many aspiring commercial property buyers.
Mind you, a perfect result would have been this reduction kicking in from July this year, but, as the saying goes, it’s better than nothing!
South Australia heading in the right direction albeit timidly
While the above measures relating the property are a very good start they should be going much further.
The stamp duty on residential property transfers needs to be looked at as it is a substantial amount of money and is no doubt holding back many home owners from upgrading to bigger more expensive homes which then reduces the number of properties on the market for first home buyers.
Without those extra homes on the market it makes it very difficult for most first home buyers to enter the market.
We do a large amount of work in the regional and rural areas of SA and when speaking to our clients and also to the Real Estate Agents in those areas they continue to say how much stamp duty is holding back many farmers from expanding their businesses.
It also makes it very difficult for farmers to sell in one area of SA and buy in another, the sale costs are one thing but the purchase costs are what usually make them decide to stay where they are as the overall costs are prohibitive.
In my opinion all rural land should have been included in with the reductions to the stamp duty payable on commercial property transfers, this would help many proactive famers to grow their businesses and assist in making SA prosper.