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Section 18 of the Duties Act 1997 (the Act) charges fixed duty on certain transactions or instruments in circumstances that might otherwise result in double duty.
Section 18 (2) provides that the duty chargeable in respect of a transfer of dutiable property made in conformity with an agreement for the sale or transfer of the dutiable property is $101 if the duty chargeable in respect of the agreement has been paid.
Section 18 (3) provides that the duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $10 if:
the duty chargeable in respect of the agreement has been paid, and
the transfer would be in conformity with the agreement if the transferee was the purchaser under the agreement; and
the transfer occurs at the same time as, or proximately with, the completion or settlement of the agreement, and
at the time the agreement was entered into, and at the completion or settlement of the agreement:
the purchaser under the agreement and the transferee under the transfer are related persons, except as provided by subparagraph, or
if the purchaser purchased as a trustee, the transferee and the beneficiary are related persons.
Section 64C also provides for a duty concession in respect of a transfer of dutiable property that is made in partial conformity with an agreement for the sale or transfer of the property. The concession applies if the interest in the property transferred to the transferee is not identical to the interest agreed to be transferred to the transferee under the agreement.
This ruling specifies the circumstances in which a transfer will be liable to the fixed duty of $10 under section 18 (2) or (3), and the information required by the Chief Commissioner when assessing such a transaction.
From 21 June 2016, certain transaction may be liable to surcharge purchaser duty under Chapter 2A of the Act. That chapter charges duty on certain transactions of residential land to foreign persons and is in addition to any duty under Chapter 2 of the Act.
Ruling
Transfers made in conformity - section 18 (2)
As a general statement, a transfer will be in conformity with an agreement for sale or transfer if:
the property, the subject of the transfer, is the same as the property agreed to be sold or transferred; and
the consideration for the transfer is the same as the purchase price under the agreement, and
the transferor is the vendor under the agreement; and
the transferee is the purchaser named in the agreement.
Section 18 (2) of the Act uses the term ‘transfer of dutiable property made in conformity with an agreement’. In Lake Victoria Ltd v Commissioner of Stamp Duties (1949) 49 SR (NSW) 262, Jordan CJ discussed the meaning and construction of similar words in section 41 (4) of the Stamp Duties Act 1920. His Honour said (at p 265):
A conveyance is not made in conformity with the agreement unless it is made to the purchaser or if the agreement provides that it is to be made not to the purchaser but to some other person, to that person.
In Vickery v Woods (1951) 85 CLR 336, Dixon CJ made the following comment on Jordan CJ's observations (at 343 - 4):
Jordan CJ distinguishes for the purpose of the application of section 41 (4) (a) the case where the conveyance to a third party is made at the purchaser's direction, from the case of a contract which provides for a conveyance to the purchaser, or if not the purchaser to some other person. In the latter case, I understand His Honour regarded the conveyance as made in conformity with the contract and not chargeable with ad valorem duty ... Clearly enough Jordan CJ was here speaking of a person identified in the contract as opposed to any nominee.
A transfer to a person who is not the purchaser named in the agreement (and where the property, consideration and parties are otherwise in conformity) will be considered to be in conformity with the agreement in the following circumstances.
An agreement that states that the property will be transferred to a named person other than the purchaser, or to one of a number of named persons. If ad valorem duty has been paid on the agreement, duty of $10 is payable on a transfer to that named person or to one of those named persons.
An agreement that has been novated, with the transfer to the substituted purchaser. If ad valorem duty has been paid on the subsequent agreement created by the novation, duty of $10 is payable on the transfer. (The liability to duty of the first agreement is considered in Revenue Ruling DUT 011.)
An agreement with a purchaser acting on behalf of a named company yet to be formed, with the transfer from the vendor to the company after incorporation, without a novation agreement. If ad valorem duty has been paid on the agreement, duty of $10 is payable on the transfer. When the transfer is lodged for stamping, it must be accompanied by a statutory declaration stating:
the date of incorporation of the company (ie indicating whether the company was in existence at the date of the original agreement); and
whether the company named in the transfer has undergone a change of name at any time before transfer.
An agreement with a purchaser acting on behalf of a named unit trust yet to be formed, with the transfer from the vendor to the trustee after establishment of the unit trust, without a novation agreement. (The transfer will be assessed on the same basis as in (c) above.)
An agreement followed by a further agreement under which the original purchaser is vendor, with the transfer from the original vendor to the ultimate purchaser. If ad valorem duty has been paid on the second agreement (the sub sale), duty of $10 will be payable on the transfer.
A transfer will not be in conformity with an agreement in the following circumstances.
An agreement with a purchaser acting on behalf of a company to be formed, where the company is not named or identified, and where there is no novation. The transfer to the company will be liable to ad valorem duty.
An agreement that is expressed to be with a purchaser or nominee of the purchaser, and the nominee is not identified in any way. A transfer to any person other than the named purchaser will be liable to ad valorem duty unless section 18 (3) applies.
Transfers to related persons - section 18 (3)
If a transfer is not in conformity with an agreement, $10 duty will still be payable if the transfer would have been in conformity but for the transferee not being the purchaser under the agreement, provided the purchaser under the agreement and the transferee under the transfer were related persons at the time the agreement was entered into.
Where there is more than one purchaser under the agreement, or more than one transferee under the transfer, the test for related persons is to be applied to each transferee and purchaser. The concession applies ”if, and only if, all (and not some) of the persons named as the purchaser in the Contract are related to all (and not some) of the persons named as transferee in the Transfer”: Warner v Chief Commissioner of State Revenue [2011] NSWADT 212 at [21].
'Related person' is defined in the Dictionary to the Duties Act to mean a person who is related to another person in accordance with any of the following provisions:
natural persons are related persons if:
one is the spouse or de facto partner of the other, or
one is the parent, brother or sister of the other, or
one is the spouse, or de facto partner, of a parent, child, brother or sister of the other,
companies are related persons if they are related bodies corporate,
a natural person and a private company are related persons if the natural person is a majority shareholder or director of the company or of another private company that is a related body corporate,
a natural person and a trustee are related persons if the natural person is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee,
a private company and a trustee are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme or discretionary trust) of which the trustee is a trustee.
An application to assess a transfer under section 18 (3) must be accompanied by a statutory declaration stating that the purchaser under the agreement and the transferee under the transfer were related persons at the time the agreement was entered into and at the completion or settlement of the agreement, and stating the nature of the relationship.
Transfers where the transferor is not the vendor under the agreement
In some cases (usually in the context of sales off-the-plan), a third party will acquire title to the property the subject of the agreement before completion and transfer to the purchaser. A transfer from a person who is not the vendor named in the agreement (and where the property, consideration and parties are otherwise in conformity) will be considered to be in conformity with the agreement if the Chief Commissioner is satisfied that the transferee is taking the transfer pursuant to the agreement. An explanation of the circumstances in which the transferor acquired the property from the vendor under the agreement should be provided.
1From 1 February 2024 the fixed duty amount of $10 is increased to $50.