Abolition of NSW Duty on Business Assets
From 1 July 2016 the following types of property cease to be dutiable property for the purposes of the NSW Duties Act 1997 (the Act).
Business assets (not including land)
A business asset, being, at any relevant time:
- The goodwill of a business, if the business supplied in NSW, or provided services in NSW, to a customer of the business, or
- Intellectual property that has been used or exploited in NSW, or
- A statutory licence or permission under a Commonwealth law if the rights under the licence or permission have been exercised in NSW.
- A statutory licence or permission under a NSW law (for example a taxi licence or water access licence).
- A gaming machine entitlement within the meaning of the Gaming Machines Act 2001.
Duty is not payable on the value of the above types of property which are included in dutiable transactions entered into on or after 1 July 2016.
Note: the following types of property remain dutiable property from 1 July 2016:
- land and an interest in land (including a leasehold interest and fixtures), and
- goods in NSW (subject to exclusions, such as stock-in-trade, listed in section 11(1)(j) of the Act, if the subject of an arrangement that includes a dutiable transaction over other dutiable property, such as land.
Anti- avoidance measures
Abolition does not apply in respect of a transfer or transaction that occurs on or after 1 July 2016 if it:
- replaces a transfer or transaction involving the same business asset, statutory licence or permission, or gaming machine entitlement that occurred before 1 July 2016, or
- is made or entered into pursuant to an option to purchase the business asset, statutory licence or permission, or gaming machine entitlement that was granted before 1 July 2016, or
- was made or entered into pursuant to another arrangement, made before 1 July 2016, the only or main purpose of which was to defer the transfer or transaction until 1 July 2016, or later, so that duty would not be chargeable on the transfer or transaction.
A sale of business assets that occurs, or an agreement for sale of business assets that is first executed, prior to 1 July 2016 is liable to duty.
Under section 295 of the Act, an instrument is taken to be first executed the first time that it is signed and sealed, or signed (as the case may be) by any party to it. An agreement for sale is deemed to be first executed on the date of exchange of contracts.
Duty payable on sales of business after 1 July 2016
Sales of business entered into on or after 1 July 2016 are liable to duty on the dutiable value of any dutiable property which forms part of the transaction, such as land or an interest in land (which includes a leasehold interest and fixtures).
If the transaction includes land or an interest in land, duty would also be payable on the value of dutiable goods being sold (such as moveable plant and equipment).
Under section 11(1)(j) goods in NSW are dutiable property if the subject of an arrangement that includes other dutiable property, not including the following:
- goods that are stock-in-trade
- materials held for use in manufacture
- goods under manufacture
- goods held or used in connection with land used for primary production
- a registered motor vehicle
- a ship or vessel.
An example of dutiable goods would be equipment used in the operation of a business, such as an office computer.
Note: no duty would be payable in respect of the dutiable goods if they comprise 90% or more of the value of the dutiable property being sold (see section 26 of the Act and Revenue Ruling DUT 004).
- If a sale of business includes a transfer of a nominal valued lease and goods, and no other dutiable property, $10 duty would be payable on the Sale of Business Agreement, $10 for the Transfer of Lease and $10 for the Duplicate Sale of Business Agreement.
- If the value of goods is greater than 90% of the dutiable value of all the dutiable property, disregard the value of the goods (pursuant to section 26). $10 duty would be payable on the Sale of Business Agreement, $10 for the Transfer of Lease and $10 for the Duplicate Sale of Business Agreement.
- If the value of Plant and Equipment / Goods is less than 90% of the dutiable value of all the dutiable property assess Sale of Business Agreement on value of all Plant and Equipment / Goods and $10 for duplicate Agreement and $10 for Transfer of Lease.
- If dutiable goods are transferred that are fixed (not movable) they will be dutiable with the lease (as fixtures are an interest in land).
Agreements for sale of land and business which are part of the same arrangement
If an agreement for sale of land and an agreement for sale of business are part of the same arrangement, duty is payable on the aggregate dutiable value of the dutiable property the subject of those transactions.
|Agreement for sale of land||Agreement for sale of business|
|Dutiable value = $500,000||Goodwill = $200,000 (not dutiable)|
|Plant and equipment = $100 000 (dutiable)|
|Stock-in-trade = $50 000 (not dutiable)|
Duty of $22,490 is payable on the agreement for sale of land (calculated on $600,000), and $50 duty is payable on the agreement for sale of business under section 18(1).
Duty of $10 would be payable on any transfer executed pursuant to the above agreements.
Apportionment of the dutiable and non-dutiable items would generally be accepted where the vendor and purchaser are acting at arms’ length. Certified financial statements may also be required. An independent valuation of all items of dutiable property is required where the vendor and purchaser are not acting at arms’ length.
If an agreement for sale of land is entered into before 1 July 2016 and an agreement sale of business, which is part of the same arrangement, is entered into on or after 1 July 2016, the agreements would be considered a single dutiable transaction and be liable as if entered into prior to 1 July 2016.
Examples of what would be viewed as the same arrangement would include agreements that contained an interdependency clause, or where options were entered into prior to the agreements.
Whilst a strong indicator of same arrangement there is no requirement that the vendors be the same, or associated persons, or that the purchasers be the same or associated persons for the transaction to form part of the same arrangement.
Transfer of lease
A leasehold interest is an interest in land, and a transfer, assignment or surrender of lease is liable to duty at the general rate set out in section 32 of the Duties Act on the dutiable value of the interest transferred.
Interim stamped agreements for sale
An agreement to transfer any of the abolished dutiable property first executed before 1 July 2016 which was interim stamped with estimate duty (under section 49 of the Duties Act) will continue to be liable to additional duty even if the date of final purchase price or completion occurs on or after 1 July 2016. A refund of estimate duty will also be provided in these circumstances if the estimate duty was more than should have been paid at completion.