Property Options and Stamp Duty

Hi mookii

Stamp Duty is a State based tax and it would help if you could let us know what State you're opperating in as there are quite a few differences between the States.

Speaking only of "Call Options", most States only charge Stamp Duty on the Option Fee.  so if you pay an Option Fee of $100, you only pay Stamp Duty on that $100 (not the Strike Price).

However in Victoria, if there is a Lease associated with your Call Option, you must pay full Stamp Duty on the Strike Price when the Lease and Option are entered into.

Cheers,  Paul

Hi Paul,

So if I understand your response to Mookii above, if I have a call option (one where I can opt out of the deal) I pay Stamp Duty on the Option Fee, which in my case was $1.00, I'm in Victoria & so is the land.

The question I have is when I assign the Option Agreement what do I pay & what on?

Do I pay GST on anything?
Do I pay Stamp Duty on anything?

I've spoken with 2 lawyers, an accountant & an developer who uses Options in QLD & all give the same advise.

The site is Residential Zone 1 & will remain Residential Zone 1, I can either Short Sell my Option Agreement now to a developer, or  Long Sell my Option Agreement to a developer once I have Planning Approval.

I just want to know what I have to pay to the ATO or State Revenue Office, to work out how much I need to ask to cover the costs.

Your advice would be appreciated.
Sarah

Sarah
Look at a recent Vic case Drouin Commercial Pty Ltd v Commissioner of State Revenue  [2009] VCAT 1082
http://www.austlii.edu.au/au/cases/vic/VCAT/2009/1082.html

see the summary of it here
http://www.blakedawson.com/Templates/Publications/x_publication_content_page.aspx?id=56135

That may give you some clues (I haven't read it)

Sarah, you should read the full case.

see s32Q
http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/s32q.html

32Q. How duty is charged on transfer



(1) Duty on a transfer to which this Division applies is not charged in
respect of the transfer from the vendor to the transferee, but is charged
separately and distinctly on-

   (a)  the dutiable value of the option; and

   (b)  the dutiable value of the subsequent transaction by which the final
        subsequent purchaser obtained the transfer right; and

   (c)  if there were any other subsequent transactions, the dutiable value of
        each of those transactions.

It will be hard to sell the idea of an option to a vendor because they will not probably understand it and they really won't get much out of the deal other than the option fee. You could increase your option fee and remind them that they get to keep this even if the option lapses and nothing further happens.

Without checking too closely i think if you purchase an option on a property for $1 then you would pay stamp duty on the amount of $1 – there is probably a minimum nominal sum.

If you then onsold the option you would have  capital gain of selling price less purchase price less costs. So on your example $499,999 capital gain. You wouldn't get the 50% discount unless you had held it for 12 months of more. less legals.

Why not ring the OSR and ask them the question. Say you are buying an option on some land and how is the stamp duty calculated. They won't give legal advice but should be able to help with a basic question like this.

GST is a different matter. I am not sure if it would apply, but if it did then it is 10%, so you would pay 10c on the purchase and have to charge 10% on the sale which would be $50,000 on $500,000.

On another note, why would a vendor accept a $1 option price? They will not benefit much out of it, and will probably spend $500 in fees for their lawyer to explain it to them (and tell them not to accept).

What do you mean by ledger doc?

Hi Coalstar

Always check with your lawyer and accountant but yes, you can write almost anything into an Option Agreement that both parties agree upon.  And if this Agreement is generating income for one of the parties, that income will have to be taken into account in its overall tax position.

Cheers,  Paul