If you ever buy or transfer two or more properties in one arrangement, this article is for you. Most people in the property market know of transfer duty (formerly known as stamp duty). It is the tax payable on most property transactions. Duty is calculated based on the purchase price of the property or the value of the property; whichever is higher.
The amount of transfer duty will vary based on many considerations, including whether or not a concession or exemption is available (for information on some of the concessions available, see here).
Whether or not transactions are required to be ‘aggregated’ will also affect the amount of transfer duty payable.
What is aggregated stamp duty?
Transfer duty increases at progressive rates, depending on the value of the property. In some circumstances, State legislation requires two or more transactions to be grouped together and to be taxed as one arrangement (aggregating the transactions).
The effect of considering a group of transactions as being substantially one arrangement is that a higher rate of duty will be imposed. This is because duty is calculated on the total of the values of the transactions instead of on each separate transaction.
The sting in the tail is that rates of duty increase as the value increases. This means that the combined duty will be more than duty on the sum of two unrelated transactions.
The aggregation of dutiable transactions is intended to see that taxpayers in similar circumstances are treated consistently and equitably regardless of how transactions may be structured or documented or the number or type of properties involved.
What triggers a linked transaction?
A linked transaction is most commonly when the same purchaser is involved with the transfer of several properties. The legislation sets out certain factors which are considered in determining whether or not the aggregated duty is triggered. The factors include:
- if the transactions are both put into one contract;
- if the transactions are put into separate contracts but they are conditional on entry into, or completion of, any other transactions;
- whether the parties to any of the transactions are the same or are related;
- the time frame over which the transactions take place;
- whether, before the transactions take place, the dutiable properties were used together or dependently by the transferor or transferors;
- whether, after the transactions take place, the dutiable properties are used together or dependently by the transferee or transferees.
Examples of aggregated transfer duty situations
Example 1 – same buyer buying from the same seller
Person A purchases Lot 1 in Smith Street from Person B for $200,000.00 and the stamp duty payable on this transaction (with no concession) is $5,425.00.
Person A also purchases Lot 2 in Smith Street from Person B for $300,000.00 and the stamp duty payable on this amount is $8,925.00.
The total stamp duty payable for the above is $14,350.00 if they were to be assessed as separate transactions.
However, as the two transactions give effect to one arrangement because the same buyer is purchasing from the same seller, they must be assessed as one transaction. This means that the duty must be assessed on the two values added together, which totals $500,000.00.
Therefore, the aggregated transfer duty payable will be $15,925.00.
Example 2 – same buyer and different, but related sellers
Let’s use the previous example, but say that the seller for Lot 1 is a Person B and the seller for Lot 2 is a Company, in which Person B is a major shareholder.
The Office of State Revenue considers Person B and the Company as related persons under the Duties Act, which means this triggers a factor for aggregating the transactions.
These are only two examples which show when stamp duty is to be aggregated, however there are also many more situations which can arise.
How do I know whether my transactions will be aggregated?
Your Solicitor will assess you for transfer duty and will let you know whether you are required to aggregate. Solicitors are legally bound to assess the correct amount of duty.
It is important that you give your Solicitor all of the relevant facts because if you do not aggregate when you should, there are serious consequences. The Queensland Office of State Revenue may reassess the transaction and require you to pay the difference in transfer duty plus any Unpaid Tax Interest that may have accrued.
Like Big Brother, the government computers are very powerful and will almost certainly pick up on any suspect underpayment of duty.
The Office of State Revenue also provide an interactive questionnaire to help buyers work out further they are required to aggregate transactions, see here.
Sajen Legal are experts in this area and can put your mind at ease if you are unsure about complex issues such as this. Feel free to contact us today if you have any questions relating to duty aggregation, property law generally or your conveyance in particular.