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When you buy a business in NSW, you must pay transfer duty if the sale includes land or an interest in land, such as a lease.
A business is any activity you do regularly with the aim of making a profit.
It does not need to be a company, corporation, partnership or have any formal organisation. It can be any size. Selling homemade jam at a local market each Sunday is a business.
Transfer duty is due three months after you sign the business sale agreement.
Businesses will usually own assets. Assets are anything of value that a business owns, benefits from or has use of, in generating profit. The types of assets that a business owns will vary depending on the nature of the business.
Below is a list of some common examples:
land;
lease of land
plant and equipment (moveable or fixed) e.g., office equipment; wind turbines
stock-in-trade e.g., pharmaceutical products in a chemist
debtor receivables e.g., outstanding invoices
work-in-progress e.g., a half-built table in a furniture factory
intellectual property e.g., trademarks, copyright, patents and domains
statutory licences e.g., taxi or liquor licences
information e.g., travel data in a courier company, and
goodwill.
Excluded assets
You do not need to pay transfer duty on:
goods that are stock-in-trade
manufacturing materials, or anything under manufacture
assets used on land for primary production
livestock
registered vehicles
ships or vessels.
Duty will apply on assets that cannot be removed from the property, such as fixtures.
On and from 1 July 2016, you also no longer have to pay transfer duty on:
gaming machines
intellectual property used in NSW.
licences or permissions under NSW law or Commonwealth law, if used in NSW, such as a taxi licence or water access licence
the goodwill of a business if it supplies goods or services in NSW.
You must pay transfer duty on these assets if your agreement is replacing one made before 1 July 2016 for the same business property and assets.
Section 21 of the Duties Act 1997 defines the dutiable value of dutiable property in a dutiable transaction as the greater of the consideration (if any) for the dutiable transaction, and the unencumbered value of the dutiable property.
The consideration usually means the money or value passing which moves the transaction, while the unencumbered value means the value of the property disregarding the debts or financial obligations over the property.
If a dutiable transaction involves goods and other dutiable property, the Chief Commissioner may disregard the value of the goods in the transaction if the dutiable value of the other property does not exceed 10% of the dutiable value of all the dutiable property in the transaction.
Below is an example of when the leasehold interest does not exceed 10%
Transfer of Lease $1k
Moveable Goods $99k
Goodwill $100k (non-dutiable)
As the dutiable value of the leasehold interest being transferred does not exceed 10 per cent of the dutiable value of all the dutiable property in the transaction (being $1k / $100k = 1%), the Chief Commissioner will disregard the value of the goods and ad valorem duty is payable on $1k.
Below is an example of when the leasehold interest exceeds 10%
Transfer of Lease $15k
Moveable Goods $85k
Goodwill $100k (non-dutiable)
As the dutiable value of the leasehold interest being transferred exceeds 10% of the dutiable value of the dutiable property (being $15k / $100k = 15%), the Chief Commissioner will not disregard the value of the goods in this transaction and ad valorem duty is payable on $100k.
In addition to ad valorem duty, you may also need to pay transfer duty for any:
Transfer duty is calculated as though it's one transaction when land and business goods are sold under different agreements, but as part of the same arrangement, including:
agreements containing an inter-dependency clause
where the parties entered into options before making the final agreements.
The buyers and sellers do not need to be the same parties on each agreement for it to be the same arrangement.
