Tax Bites: Transfers of Dutiable Property – Be aware of the changes!

Over the last several years, there have been a raft of changes to the Victorian Duties Act that will increase the revenue base from stamp duty.

The imposition of surcharge stamp duty on “foreign purchasers” (effective from 1 July 2015) is already starting to bring revenue windfalls to the State Government.  No doubt the definition of “foreign purchaser” and how it applies specifically to discretionary trusts will continue to trip up advisors going forward given the extremely wide class of beneficiaries that a discretionary trust typically has.

Effective from 1 July 2017, further amendments have been made to the Duties Act that will need to be considered.

  1. The previous stamp duty exemption on the transfer of assets between spouses has now been removed and replaced with a concession that is a lot more limited.  Effective from 1 July 2017, the broad exemption previously available is now limited to the transfer of the principal place of residence between spouses.  Furthermore, in order to qualify for the exemption, (i) there cannot be any consideration paid between the spouses for the transfer (which is a change from the previous rules); and (ii) at least one of the spouses must continue to occupy the premises as their principal place of residence for at least 12 months after the transfer.

  2. The other key change relates to the previous “off-the-plan” stamp duty concession which could be used for all new-build developments.  While the concession continues to apply for contracts entered into prior to 1 July 2017, the concession is limited in application from 1 July 2017.  Effectively, from 1 July 2017, the off-the-plan duty concession can only be applied where the purchaser qualifies under either the principal place of residence duty concession (contained in section 57J of the Duties Act) or the first home owner exemption or concession (contained in section 57JA of the Duties Act). For example, section 57J of the Duties Act provides concessional rates of stamp duty where a purchaser purchases property with a value of less than $550,000 that will become the purchaser’s principal place of residence for at least 12 months.  If, after notionally applying the off-the-plan duty concession, the dutiable value of the property is less than $550,000, the off-the-plan concession will continue to be available to the purchaser.

    Similarly, section 57JA of the Duties Act provides stamp duty concessions (either in the form of exemption or concessional rates of duty) where a first home buyer purchases a property with a maximum value of $750,000 that will become their principal place of residence for at least 12 months.  If, after notionally applying the off-the-plan duty concession, the dutiable value of the property is less than $750,000, the off-the-plan concession will continue to be available to the purchaser.

    Importantly, if the property being purchased will not become the principal place of residence of the purchaser, or the purchase price (after notionally applying the off-the-plan concession) exceeds the above maximum threshold limits, the off-the-plan stamp duty concession no longer has application.

If you have any further questions, please do not hesitate to contact Tim Olynyk on (03) 9810 0700 or at tim.olynyk@banksgroup.com.au.

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