The NSW State Government has flagged that on 1 July 2016 it will be abolishing stamp duty on the following transactions:
- Transfer of business assets
- Transfer of marketable securities (eg shares in private companies and units in unit trusts)
- Transfer of statutory licences and gaming machine entitlements
- Mortgage Duty (to the extent it has not already been abolished)
You may recall that the NSW State Government has on a number of occasions flagged that these duties were being abolished and then delayed the abolition date. Hopefully, this time the abolition will proceed as planned.
LANDHOLDER DUTY – LAND RICH COMPANIES AND UNIT TRUSTS
However, there is a potential pitfall for companies and unit trusts which are landholders.
Despite the proposed abolition of stamp duty on the transfer of shares in a private company or units in a unit trust from 1 July 2016, it appears that landholder duty will still remain.
Landholder duty is payable on the acquisition of a significant interest in a private company or unit trust that owns land and meets certain other requirements.
As such, stamp duty may still be payable on the transfer of shares in a private company or units in a unit trust, where the transfer involves a significant interest and where the company or unit trust (or its linked entities) has land holdings in NSW with a value of $2 million or more.
There are some exemptions for companies which hold rural land. This can be a complex area of law and we recommend legal advice be obtained prior to any transfer occurring.
TRANSFER OF A LEASE IN CONJUNCTION WITH A SALE OF BUSINESS
Where a lease is transferred with the business (which often happens with business premises that are rented), then although the goodwill of the Business will be exempt from stamp duty, nevertheless the plant and equipment and any consideration for the transfer of lease is liable for duty.
If the transaction were instead structured with a new lease being granted to the new owner of the business, then the plant and equipment would not be liable for stamp duty.
Accordingly when buying a business that operates from leased premises, you should consider whether the costs of the stamp duty that would be payable in relation to the plant and equipment and the transfer of the lease is likely to outweigh the costs of negotiating and entering into a new lease instead.
TRANSFER OF LAND IN CONJUNCTION WITH A SALE OF BUSINESS
Where a sale of land and a sale of business takes place, then whilst the goodwill of the Business will not be liable to duty, nevertheless the land and the plant and equipment of the business will be liable to duty.