Transfer Duty in business acquisitions

September 6, 2015

In commercial transactions transfer duty or stamp duty is often overlooked – however, it remains an important consideration.  Businesses should ensure they have taken the costs of stamp duty into account when making an acquisition.

 

Transfer duty can apply to the acquisition of property, transfer of title or to existing rights.  This article explores the application of stamp duty in business acquisitions.

 

Transfer duty stamp duty what’s the difference?

 

Transfer duty is the same as stamp duty. Neither transfer duty nor stamp duty are terms defined by the Duties Act 2001 (Qld) (Duties Act).  All references to sections of the Duties Act are references to the Queensland Act.  The term ‘duty’ is defined as meaning ‘a duty imposed under this act’ by the Duties Act.  When transfer duty is referred to in the Duties Act it is simply used a phrase that has the same meaning as the term ‘duty’.  Although the term transfer duty has been used in the Duties Act since 2001, the term stamp duty has been around for such a long time some people still refer to transfer duty as stamp duty.

 

What is transfer duty?

 

At its most basic form transfer duty is the amount of money that needs to be paid to the respective State Government for its role in transferring the title of the property from the selling party to the purchasing party.

 

More specifically, transfer duty is the duty that must be paid on dutiable transactions for dutiable property based on the dutiable value of the dutiable property in Queensland.

 

What is a dutiable transaction?

 

A dutiable transaction includes:

 

(a)        a transfer of dutiable property: s9(1)(a);

(b)        an agreement for the transfer of dutiable property whether conditional or not: s9(1)(b);

(c)        an acquisition of a new right on its creation, grant or issue: s9(1)(f); or

(d)        a partnership acquisition: s9(1)(g).

 

 

What is dutiable property?

 

Dutiable property is defined to include:

 

(a)        land in Queensland: s 10(1)(a);

(b)        a transferable site area: s 10(1)(b);

(c)        an existing right: s 10(1)(c);

(d)        a Queensland business asset: s10(1)(d); and

(e)        a chattel in Queensland: s10(1)(e).

 

 

What is the dutiable value of a dutiable transaction?

 

The dutiable value of a dutiable transaction occurring under s 48 of the Act is:

 

(a)        the consideration for the dutiable transaction: s 11(1)(7)(a); or

(b)        the unencumbered value of the dutiable property if the unencumbered value of the dutiable property is                     greater than the consideration for the transaction: s 11(7)(b)(iii).

 

What is the unencumbered value of property?

 

Pursuant to s 14(1) the unencumbered value of property is the value of the property determined without regard to:

 

(a)        any encumbrance which the property is subjected to (contingent or otherwise);

(b)        any arrangement to which the parties are not dealing with each other at arm’s length, or that results in the              

 

reduction of value of the property; or

(c)        any arrangement for which a significant purpose of any party to the arrangement was in the commissioner’s             opinion, the reduction of value of the property.

 

 

This means is that the unencumbered value of property is the price that a real estate agent would put on the property or what the property would sell for if the property were to be sold at auction.

 

When is the unencumbered value determined?

 

Under s 15(a) of the Act, the encumbered value of the property is taken at immediately before the surrender of the property.

 

Who must pay the transfer duty?

 

Under s 17(2) the transfer duty must be paid by the parties to the transaction.  Although the legislation states that the duty must be paid by the parties, it is usually the purchaser who pays the transfer duty.

 

 

When is the dutiable value of a dutiable transaction reduced?

 

There are some transactions where it is possible to reduce the dutiable value of the dutiable transaction. Transactions that may have a reduced dutiable value are transactions that involve:

(a)        a business: s 37;

(b)        a partnership: s 48;

(c)        the purchase of a home or first home: s 91 and s 92;

(d)        a family business: s 105; or

(e)        superannuation: s 109.

 

 

Just because a transaction may involve one of the items listed above it does not mean that the transaction is automatically eligible for a reduction in the dutiable value.  Also the amount that the dutiable value is reduced can vary.

 

For example, a business that transfers a supply right is not a dutiable transaction, unless another type of dutiable property is the subject of the same transaction, or the supply right is to be transferred with all of the supply rights of the business.

 

Legislative references

Duties Act 2001 (Qld)

 

Useful cases

 

ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue NSW [2012] HCA 6

 

Chief Commissioner of State Revenue v Centro (CPL) Limited [2011] NSWCA 325

Conder Tower Pty Ltd & Ors v Commissioner of State Revenue [2012] VSC 107

 

 

 

Further resources

Queensland Government – Office of State Revenue – Transfer Duty

Queensland Government – Office of State Revenue – Transfer duty and first home buyer grants estimator

 

________________________________________________________________________________________

 

Copyright 2015 by Bennett & Bennett Lawyers

 

This article does not constitute legal advice and should not be relied upon as legal advice. You should seek professional advice for your own unique circumstances. 

 

 

 

 

 

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