Stamp duty changes
Stamp duty changes in the ACT: What you need to know when buying property in the ACT
In December 2016 the median house price in Canberra was $621,000, up 5.3% in the December quarter alone(1). The average price of other dwellings in the ACT (being units and townhouses) was $425,000(2). Prices of Australian real estate have only been growing since then, as Australia hits one of its largest housing crises in recent memory. Within this precarious climate, the ACT government is introducing reforms to stamp duty that are slated to come into effect in mid-2017(3). Buyers of property in the ACT should familiarise themselves with these changes. But what do you need to know about these reforms?
When is duty to be paid?
Upon implementation of the reforms, Land and improvements duty (often referred to as stamp duty) will not be payable until a transfer of dutiable property has been registered with the Registrar-General. An instrument that gives effect to a dutiable transaction such as a Contract for Sale must be lodged with the registrar-general within 14 days of the date the agreement is completed. Duty must then be paid within 14 days of the date of registration of the Transfer.
This represents a significant change for those purchasing property in the ACT, who will not be required to pay duty until after settlement and registration have occurred. These changes also apply to the purchase of an off-the-plan unit, where duty will not be payable until registration of the Transfer. Currently stamp duty for an off-the-plan purchase is payable within 1 year of entering into the Contract or earlier if the unit is completed. Now you will not have to pay stamp duty until the unit is completed.
How is the stamp duty amount secured?
We assume in practice ACT may adopt a system similar to that in Victoria (where the incoming mortgagee registers the Transfer and attends to payment of stamp duty from the loan amount). Any unpaid duty liability under the new regime will become a secured charge on the property under the Taxation Administration Act 1999, allowing the ACT government to take measures to recover the debt. Accordingly, purchasers will need to ensure they have the funds to pay the duty when the liability arises.
There will also be changes to the application process for exemptions to stamp duty. To apply for an exemption a purchaser must indicate the category of exemption when the Transfer is lodged with ACT Land Titles. The purchaser will not be required to provide supporting evidence unless requested by the ACT Revenue Office. However, as with the current duty model it appears there will be no pre-assessment of exemptions and purchasers must ensure they are able to pay the full duty amount if an exemption is not granted.
If you require specific duties advice or advice regarding a particular transaction, please do not hesitate to contact a member of our experienced Commercial and Real Estate Team.
1. Real Estate Institute of Australia, Real Estate Market Facts December Quarter (2016).
2. Real Estate Institute of Australia, Real Estate Market Facts December Quarter (2016).
3. In the Revenue Legislation Amendment Bill 2016 (No. 2).
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