NSW Stamp Duty - Amendments to Call option nominations

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Amendments to the NSW Duties Act have been introduced following the NSW Supreme Court decision in CTI Joint Venture Company Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 20.

This case concerned the imposition of duty on options and nominations on NSW land holdings.  Whilst ultimately unsuccessful in this case, the NSW Chief Commissioner had sought to assess duty separately in relation to a nomination clause contained in the call options over landholdings in Chatswood.

Although an option to purchase land in NSW has always been dutiable property, prior to these amendments, it was possible for an option holder to nominate another person to be the purchaser under an option or otherwise pass the benefit of that option to a third party without triggering stamp duty.

Under the amendments, NSW Duty will apply to call options as follows:

A transfer of an option to purchase NSW land will be taken to occur if a call option holder, for valuable consideration:
* nominates another person to exercise the option; or
*nominates another person as purchaser or transferee of the land the subject of the option on or before the exercise of the option; or
*agrees to a novation of the option, or otherwise relinquishes rights under the option, so that another person obtains a right to exercise the option or to purchase the land.

In each instance, the transfer of an option to purchase land will be deemed to occur. The person liable to pay the duty is the person who is nominated as purchaser or transferee of the land or who acquires the right to exercise the option.

Duty on the nomination or novation will be calculated based on the consideration paid for the nomination or novation, or the value of the option, whichever is higher, and is payable within 3 months after the option transfer date.

The option transfer date is:
*in the case of a nomination, when the nomination is made; or
*in the case of a novation, when the option holder agrees to the novation or otherwise relinquishes rights under the option.

The consideration for the transfer of the land will be taken to include the amount or value of the consideration provided by the transferee for the option (whether for its grant, transfer, exercise or otherwise). To avoid the payment of double duty that would arise on the inclusion of the value of the option in the value of the NSW land purchased, the duty payable on the transfer of the land will be reduced by the amount of any duty paid by the transferee on the transfer of the option to the transferee.

These amendments commenced on 23 October 2014 and apply to options granted before or after this date.

It should also be noted that whilst these amendments may not change the overall amount of duty payable in respect of dutiable transactions concerning landholdings, they are likely to change the time at which the duty is paid. Accordingly, landholders and developers should consider these provisions when nominating or novating under an option to purchase NSW land and the duty consequences that will arise at that time.