Is duty now payable on leases?

Amendments to the Duties Act 2000

The Issue:

The Duties Act 2000 ('the Act') has been amended to enable the State Revenue Office ('the SRO') to assess duty on Leases, which it believes are used as a mechanism to avoid duty. So how does this effect lease negotiations?

What Happened?

The Act has been amended with provisions that would enable the SRO to assess duty on:a) b) The transfer of a Lease where any consideration is paid; or c) The surrender of a Lease of a type that would fall within a) or b) above. (subject to certain exclusions).

The grant of any Lease where consideration (including non-monetary consideration) other than rent reserved, as defined in the Act, is paid on the grant of the Lease;

Duty can be assessed on the Lease at the usual transfer of freehold rates and shall be assessed on the greater of the value of the Premises or the value of the consideration paid.

On the terms of the Act, these amendments will allow the SRO to assess duty on all Leases where any benefit other than rent reserved is paid. However, despite the breadth of these amendments, the SRO has stated that, in terms of policy, they only intend to use the amendments as an anti-avoidance provision and assess duty only where a Lease or transfer of Lease or surrender is completed in order to avoid duty that would result from a change in beneficial ownership.

Practical Tip:

Be aware that the grant, transfer or surrender of Leases may now have duty consequences. The SRO has provided guidance on its website as to the circumstances which may result in duty being assessed. However, these are for guidance only and are not binding on the SRO. Accordingly, where payments or other consideration are being considered beyond rent reserved, or when a very long term lease or the grant of rights over the Premises are being considered, a Landlord should obtain legal advice and, if appropriate, seek a private ruling from the SRO.

If you require assistance, please contact us on 1300 205 506 or by email at sp@sharrockpitman.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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