30/03/2011

In NSW stamp duty is only payable on some mortgages, not all.

Under section 221C of the Duties Act 1997 (NSW), if the property acquired is ‘investment housing’ and the mortgagor (borrower) is an individual, then no mortgage duty is payable.

This needs to be considered when arranging a limited recourse loan for a private superannuation fund.

The usual process for limited recourse borrowing for a private super fund is that the fund’s trustee:

1. sources the asset for purchase;
2. arranges a loan to the trustee;
3. establishes and appoints a Holding Trustee;
4. arranges for the Holding Trustee to purchase the asset with the funds solely coming from the fund;
5. transfers the title to the Holding Trustee; and
6. simultaneously registers the mortgage. 

Registration of the mortgage is necessary under s.109 of the SIS Act.  But in order to be eligible for registration the mortgage must first be stamped by the Office of State Revenue if applicable.

Stamp duty will not be applicable if the property is ‘investment housing’ and the borrower (in this case the trustee of the fund) is an individual rather than a company.

It does not matter that the Holding Trustee holds title of the property, the provision of the Duties Act is solely concerned with who the borrower is; which in limited recourse borrowing transactions is the super fund trustee.

As this provision relates solely to investment housing, the acquisition of commercial property does not attract this exception for individual trustees in the payment of mortgage duty.

In terms of investment housing, section 221C (5) defines this as

“any private dwelling house that is used, or is intended to be used or sold, for investment or business purposes (or both) by the borrower or by any of the borrowers.”

While this definition does refer to ‘any private dwelling house’ this includes residential units and apartments.

If you have any questions in regard to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.