Stamp and Cheque Duties Amendment Act 1982

This commentary item was published in Public Information Bulletin Volume 120, March 1983.

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Section 1 - Short Title, Commencement and Application

Subsection (1) provides that this Amendment Act is to be read with, and form part of, the Stamp and Cheque Duties Act 1971.

Subsection (2) provides that the Act applies in respect of every instrument of conveyance executed on or after 6 August 1982.

Section 2 - Conveyance Duty

Subsection (1) of this section amends section 15 of the principal Act by inserting a new subsection (2B) to ensure that an unfair advantage cannot be derived by transferring property by way of separate instruments each conveying a partial interest in that property.

Legislation was enacted in 1981 to give effect to the 1981 Budget announcement to abolish the "first home exemption" and the "larger/smaller home exemption" and to introduce a new reduction in conveyance duty, equivalent to an exemption for the first $50,000 of the value of the property conveyed, on the purchase of an owner/occupied home.

The rate at which conveyance duty is charged was altered at the same time from a flat rate of 1 percent of the value conveyed to a three level graduated scale with a maximum rate of 2 percent.

Since the new measures were introduced, cases have been presented where a property has been transferred by way of separate instruments conveying fractional interests. The effect was that each instrument stood by itself for the purposes of the residential home reduction in duty and the rate at which duty is assessed.

Even where the residential home reduction was not available, such as in the transfer of commercial properties, instruments conveying fractional interests attracted a lower rate of duty than would have been assessed under the graduated scale had the transfer been by way of one document.

The amendment to section 15 remedies this situation by in effect treating the separate instruments as one instrument for the purpose of computing conveyance duty.

This is achieved by adding together progressively the values of the property conveyed by each of the instruments and computing conveyance duty on that progressive value. The duty so computed is then reduced by the amount of duty already payable or paid on the instruments that have previously been stamped. This effect is best explained by way of illustration.

NB

• Subsection (2B)(a) - requires that an instrument be an instrument of conveyance of a partial interest in property.
• Subsection (2B)(b) - requires that the instrument be one of two or more such instruments of conveyance in relation to that same property.
• Subsection (2B)(c) - aggregates the values of the instruments for duty purposes.
• Subsection (2B)(d) - allows a deduction for the duty payable or paid on the previously stamped instruments.

Application of the new legislation in given situation

Residential home $150,000 sold by "S" to "Z" by way of 3 instruments of conveyance each conveying a one-third interest in the property. The instruments are presented for stamping over a period of three weeks, ie, one per week. Documents A: B: C:

STEP BY STEP PROCEDURE, by reference to section 15(2B)

Document A

Paragraph (a) - Yes - Document A is an instrument conveying a partial interest.

Paragraph (b) - No - it is not (so far as is known at this time) 1 of 2 or more such instruments.

Duty is therefore computed as for "ordinary" instrument of conveyance (s 15(2A)):

Document B

Paragraph (a) - Yes - Document B is an instrument conveying a partial interest.

Paragraph (b) - Yes, it is known to be 1 of 2 or more such instruments.

Paragraph (c) - conveyance duty is computed on Document B as if the value conveyed by it were the sum of:

• the value conveyed by Document B, ie, $50,000; and
• the value conveyed by the other instruments referred to in paragraph (b) on which duty has already been computed, ie, Document A $50,000.

Thus duty is to be computed on -

Paragraph (d) - from the duty so computed a deduction is allowed for the duty payable on the document(s) referred to in paragraph (c), ie, Document A - Nil duty and therefore Nil deduction.

The balance $750 is the duty payable on Document B

Document C

Paragraph (a) - Yes - Document C is an instrument conveying a fractional interest.

Paragraph (b) - Yes - it is known to be 1 of 2 or more such instruments.

Paragraph (c) - conveyance duty is computed on Document C as if the value conveyed by it were the sum of:

• the value conveyed by Document C, ie, $50,000; and
• the value conveyed by the other instruments referred to in paragraph (b), ie, Document A $50,000 Document B $50,000.

NB: Although in computing duty on Document B the dutiable value was calculated by adding the value in Document A to that in Document B, this "calculated" value is not the value conveyed by Document B for the purpose of aggregating the values under (c).

Thus duty computed on -

The balance, ie, $1,000 is the duty payable on Document C.

PROOF

Subsection (2) amends section 15(3) of the principal Act by excluding conveyances of shares, mortgages, debentures, mining rights, etc, from the provisions of the new subsections (2B) and   (2C).

Section 3 - Stamp Duty Exemption on First Farm Purchases

Previously, to obtain the benefit of an exemption from conveyance duty on the purchase of a first farm, one of the conditions was that the purchaser must not own or have owned an interest in farm land or shares in a farming company, the value of which exceeds $100,000.

(The figure of $50,000 specified in the original definition of "substantial interest" in section 22B(7) of the Act was increased in 1981 to $100,000 by Order-in-Council.)

Section 3 of this Amendment Act increases the limit from $100,000 to $150,000 and applies to every instrument of conveyance of farm land or shares in a farming company executed after Budget night. Where there is more than one instrument in respect of the same transaction, for example, a transfer and agreement for sale and purchase, the Order applies only if the earliest instrument is executed on or after that date. The new figure of $150,000 is largely to keep pace with current market values, because of increases in values of farm land since 1981.

The effect of the amendment is that a person who holds or has held an interest in farm land or shares in a farming company valued at $150,000 or less, will be entitled to the exemption on the conveyance to him of other farm land or shares provided the other requirements of section 22B are met.