Stamp duty issues on lease options – VIC

Hi Russell

The new rules regarding Options in Vic don't relate to 'above market rent'.  If you take an Option over a property in Vic, without a Lease, no Stamp Duty is payable.

Stamp Duty however is payable on the 'strike price' of an Option, if the Option holder also has a Lease on the property.

These new rules where brought in because long term Lease/Options were being used in large commercial transactions and the State Revenue Office was missing out on a lot of revenue     Lewis O'Brien, a solicitor and member of the Vendor Finance Association, has been fighting a tough battle against these new regulations with the SRO but to no avail so far.  At the moment the SRO unofficially admit they didn't mean to 'rope in' residential property but, to date, they aren't about to change the rules.

As a result of this, vendor finance Instalment Contracts have become more popular in Vic.  You'll find some lively discussions on the subject at the next Melbourne meeting of the Vendor Finance Association.

Cheers,  Paul

Hi I bought the Rick Otten Rent to Buy course some time ago but never used it, I decided it was time do  something with it

and got out all the folders etc, I emailed the VIC solicitor who was on the Rick Otten Course Lewis O'Brien, and emailed him he was very helpful, he said Stamp Duty applies in Vic

Cheers

good suggestion Paul!

Hi Scott

That should be pretty easy 

Cheers,  Paul

Hi Ilva & Alexei

Unfortunately your suggestion of a sandwich lease/option won't work in Victoria with regard to the non payment of Stamp Duty.  As mentioned above, when you take control of a property in Victoria with a lease and an option, Stamp Duty is immediately triggered.  Hence, with a sandwich L/O (sometimes called a back to back L/O) Stamp Duty would be payable twice.

There is other legal paperwork that will however get the job done for Russell, without triggering Stamp Duty.

Cheers,  Paul

From what I can see it is the opposite in WA? An instalment contract triggers stamp duty but a RTB doesn't? 

Hi Ausprop

Regarding Instalment Contracts, Stamp (Transfer) Duty is payable, in all States except Victoria, within a certain number of days of 'exchange' of contracts.  In Victoria, the trigger for the payment of Stamp Duty is the transfer of title (for Instalment Contracts).

Yes, it is difficult to cover increasing interest rates using the Rent To Buy (RTB) technique but it can be covered by using an Instalment Contract.  I guess it boils down to no one technique being all things to all buyers and sellers.  In some cases we put buyers in a RTB for 2 or 3 years, to save the Stamp Duty and then roll them over into an Instalment Contract.  It's just a matter of working out what's best for your buyer.

Cheers,  Paul

Couldn't agree more.  The cost to the country of the duplication and variations must be enormous.

Cheers,  Paul

Hi Ausprop

In NSW it's easy as you have to attach the Contract of Sale to the Option, so we just attach an Instalment Contract.

For WA, I'd suggest you get your lawyer to specify, in the Option, that upon exercising the Option the buyer will have the choice of a standard Contract of Sale or an Instalment (Terms) Contract with the following features …….

Cheers,  Paul