Client Update: NSW toughens mortgage duty provisions
22 June 2009
In brief: A Bill has been introduced into the NSW Parliament that proposes to make major changes to NSW mortgage duty, with effect from 1 July 2009. Borrowers with existing or potential security arrangements over NSW property, and who are intending to drawdown or grant security on or after 1 July 2009, should urgently review their existing or proposed arrangements. Partners Adrian Chek (view CV) and Tony Sheehan (view CV) report.
Limited securities
From 1 July 2009, limits on the amounts recoverable under securities will effectively be ignored. Duty will be imposed on the total advances secured, without regard to any limit.
In relation to existing limited securities, duty will be imposed on advances made after 1 July where the limit is exceeded. However, under transitional provisions, no duty should be imposed on advances exceeding the limit drawn down before 1 July.
Mortgage packages
From 1 July 2009, a mortgage package will include all securities securing the same money, regardless of when it is executed. The 28-day rule will no longer apply.
Duty will still be calculated on a proportional basis. Property proportions will need to be determined each time an advance is made or a collateral security is executed. It will no longer be possible to stamp in anticipation of future advances. This will substantially increase the compliance burden in many cases.
In some instances, credit will be given for past mortgage duty paid in other states, but there will be no outright collateral security exemption where duty has been paid in another state.
General anti-avoidance provision
A new general anti-avoidance provision will be introduced. It is broadly similar to Part IVA in the Income Tax Assessment Act 1936 (Cth). It applies where there is a scheme entered into for the sole or dominant purpose of avoiding duty, and the Commissioner issues an assessment.
If the provision applies, then duty (including any interest and penalties) applies from the date it would have been payable had the scheme not been entered into.
The provision applies where a scheme or part of a scheme is carried out on or after 1 July.
What next?
Borrowers with existing or potential security arrangements over NSW property, and who are intending to drawdown or grant security on or after 1 July 2009, should, without delay, review their existing or proposed arrangements. In some cases, it might be advisable to drawdown or grant security before the amendments take effect on 1 July 2009.
Published 22 June 2009
For further information, please contact:
- Adrian ChekPartner,
Sydney
Ph: +61 2 9230 4800
Adrian.Chek@aar.com.au - Tony SheehanPartner,
Sydney
Ph: +61 2 9230 4781
Tony.Sheehan@aar.com.au - Michael PerezPartner,
Melbourne
Ph: +61 3 9613 8500
Michael.Perez@aar.com.au - Peter AllenPartner,
Brisbane
Ph: +61 7 3334 3350
Peter.Allen@aar.com.au
