No Stamp Duty on Transfer of subdivided company title property to shareholders
With the recent publication of the new Low Rise Medium Density Housing Code, there may well be a flurry of activity in subdivision of company title duplexes in the Randwick Council area particularly around the suburbs of Little Bay, Chifley, Matraville and Malabar.
For several years there was an anomaly in Randwick Council whereby developers could get approval to build a duplex but could not get approval to subdivide the duplex and create separate lots. In order to get around this anomaly and sell of their dwellings separately, developers would set up a company title structure to hold the property and then sell off shares in the company which gave the holders of the shares the right to exclusive use of a duplex dwelling.
My previous blog post went into further detail about the way that company title works.
Now that the new Low Rise Medium Density Housing Code allows subdivision on lots that are as small as 400m2, it may be possible for owners of company title property to firstly subdivide their duplexes into separate lots and then to transfer those lots from the company and into their personal names. For more information on the process involved in achieving this, see my recent blog post here.
In terms of the stamp duty implications, pursuant to s64 of the Duties Act, transfers of the newly subdivided lots are prepared on the basis of a nominal consideration of $50.00 and they must be stamped with New South Wales stamp duty before they can be lodged for registration. Provided the Commissioner for Stamp Duties is satisfied (usually by statutory declaration) as to the following matters only nominal duty will be payable in respect of each transfer.
- That the transfer is part of an arrangement under which the transferee takes an interest in the lot similar in effect and in substitution for the interest the transferee had in the lot immediately before the registration of the strata plan in which the lot is contained.
- That the transferee was, immediately before registration of the subdivision plan in which the lot is contained, entitled to exclusive occupation of the lot by reason of:
- being the registered owner of certain shares in a company that had a memorandum of articles of association conferring that entitlement on the transferee;
- being a lessee having the entitlement conferred upon him under a duly stamped lease for a term exceeding fifty years; or
- rights under an agreement where those rights were dependent upon his being a co-owner of a parcel within the meaning of the Act.
The Revenue NSW (formerly OSR) has published a guide of the evidentiary requirements necessary to have a transfer stamped with nominal duty as follows:
- Executed original Transfer
- The Constitution and/or Memorandum & Articles of Association of the company or the Trust Deed establishing the unit trust
- Confirmation by the transferor of the details of share/unit ownership, the date of strata plan registration and the lot number to which the share/unit holder is now entitled by reason of their share/unit ownership date
- Copy of Share/Unit certificate
- Stamped document evidencing the acquisition of land use entitlement
- Evidence that the lot transferred is identical to the allocated unit
- Appropriate evidence of value of the dutiable property (refer to Revenue Ruling DUT 012) if ad valorem duty was not paid or if exemption or concession under any of sections 55, 57, 63, 68 and 78A was not granted on the acquisition of land use entitlement
- Purchaser/Transferee Declaration
If you are the owner of a company title property in the Randwick Council area and need assistance in either converting your property to a torrens title or transferring your newly subdivided property into your personal name please contact us here at Click Conveyancing and we will be happy to assist you!