State and Territory governments are always keen to obtain revenue and in many cases this is obtained through the duties that those governments collect on the conveyance of properties.
New South Wales and ACT have slightly different schemes for aggregating duty.
What does “aggregating duty” mean?
It means that if there is more than one transaction occurring within 12 months between the same seller and buyer, then the transactions are taken to be one arrangement, and duty is charged accordingly. In that case, the price paid for each transaction is added together (aggregated) and duty is calculated on the total price paid and then applied to each property.
This is important because it can significantly increase the amount of duty paid. This arises because of the sliding scale nature of duties. For example, if you are buying two properties each worth $480,000.00 and you paid stamp duty on each transaction you would incur about $13,500.00 stamp duty on each transaction, making a total of about $27,000.00. If they were aggregated, however, and you paid stamp duty on $960,000.00 the stamp duty is more likely to be $40,000.00; an extra burden of a further $13,000.00.
In NSW until 1 July 2016 this aggregation applies to other dutiable transactions such as the purchase of business assets.
In the ACT, there are exceptions to this rule, and an exemption from aggregation will apply to a transaction where:
- the transactions are for the purpose of acquiring 2 or more blocks of land in the same subdivision for the purpose of developing the blocks for resale; or
- the transactions are for the purpose of purchasing 2 or more units in the same units plan under the Unit Titles Act 2001 for the purpose of investment; or
- the transactions are for the purpose of acquiring 2 or more parcels of shares in a company or units trust scheme which either alone or together with a lease give an entitlement to occupy 2 or more areas that are on a single parcel of land; or
- that it would not be just and reasonable for the transactions to be aggregated.
An example of (b) occurred recently in a commercial/residential complex in the City where an investor (superannuation fund) bought two units for the purpose of renting them out. The stamp duty was assessed on a commercial basis on each property individually.
In NSW it is not quite as clear, but some transactions that do not constitute one arrangement and therefore would not be aggregated include:
- the purchase of separate blocks at auction,
- the acquisition of single lots in a new strata plan where the other factors are not present, even though they are bought together (this would amount to the same exemption as in the ACT for commercial purposes) or
- where there is a single loan or facility agreement that connects the agreements.
In light of these relatively opaque laws and exceptions, our warning is clear: make sure that you budget for, or are exempt from, the aggregation provisions, if looking to purchase two or more related properties in a single year.
Our expert Conveyancing team can assist you in any residential property transaction and will carefully explain to you your stamp duty liability. Contact them today!