New rules for stamp duty in the state will apply to call options, and many common arrangements including commercial leases, agreements for lease, easements and wills.
Stamp duty has applied in NSW for more than 140 years. Originally a tax on documents, it later became a tax on any transfer of land or dutiable property. The tax base has now been expanded again, purportedly as an integrity measure. From May 19 this year, duty applies to any “change in beneficial ownership” of dutiable property .that confirms duty “will be payable on the grant of a put and/or call option” entered on or after 19 May 2022.
In contrast to NSW, Victoria imposes a duty on the transfer of land at settlement . Queensland does impose a duty on contracts, but offers a deferral until certain contract conditions are satisfied.Some deals might also involve the establishment of a new managed investment scheme, typically in the form of a unit trust. Due diligence, trust establishment, investment promotion and securing debt finance can take more than three months.
To illustrate, assume a call option is granted for $1 million allowing land to be purchased for $10 million. If exercised, the $1 million option fee will be applied as the deposit and part of the $10 million price. The duty on the option fee is $40,305. Duty at general rates on the $10 million price is $534,875. There is no credit for the $40,305 already paid.Revenue NSW’s guide also confirms there will be no duty refund if the option remains unexercised.
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