SOUTH AUSTRALIA

RevenueSA

STAMP DUTIES (RENTAL AND MORTGAGE DUTY) AMENDMENT ACT 2003

Your attention is drawn to the Stamp Duties (Rental and Mortgage Duty) Amendment Act 2003 (“the Act”).

The Act amends the Stamp Duties Act 1923 to give effect to certain 2003-04 State Budget measures regarding stamp duty on rental business arrangements and stamp duty payable on mortgages. The amendments take effect from 1 October 2003. 

RENTAL BUSINESS DUTY

 There have been changes to the rental duty rates and nexus provisions. Circular No. 242 includes details of these amendments.

Details of the stamp duty on mortgages amendments are as follows.

 MORTGAGE DUTY

Effective 1 October 2003, a dual mortgage rate regime will be introduced.  A higher mortgage duty rate of 45 cents per $100 will apply to all mortgages, except home mortgages (see following definition), which will continue to be charged at the current mortgage duty rate of 35 cents per $100. 

For both rate regimes, the secured liability threshold above which the proposed differential rates apply will increase from $4,000 to $6,000.  Secured liabilities under $400 will continue to be exempt from duty and secured liabilities greater than $400 but not more than $6,000 will attract duty of $10.

 The following table summarises the application of the new rates after 1 October 2003: 

 In accordance with section 16 of the Stamp Duties Act 1923, any instrument that is stamped on or after 1 October 2003 will be subject to the new rates of duty, regardless of the date on which the instrument was executed.

Definition of “home mortgage”

 The Act provides that a mortgage is a home mortgage if the mortgagor is a natural person and the whole of the amount secured by the mortgage has, or is to be used for any of the following purposes: 

•  purchasing land on which a home that the mortgagor intends to occupy as his or her sole or principal place of residence has been, or is to be built;

• building, or making additions or improvements to, a home that the mortgagor occupies or intends to occupy as his or her sole or principal place of residence;

• repaying a loan previously taken out for one or more of the above purposes

If the amount secured by the mortgage has or is to be used for some purpose in addition to a purpose mentioned above, the mortgage will not be considered a home mortgage.

 Home means any residential premises.

If a portion of the amount secured by a mortgage is to be used for the payment of costs such as stamp duty, Land Titles Office fees or conveyancing charges, the mortgage will still be considered to be a home mortgage and subject to the lower mortgage duty rate of 35 cents per $100. 

 Redraws 

Where the amount of a re-draw/overdraft does not exceed the amount of the original loan, upon which mortgage duty has already been paid, additional duty will not be required to be paid.

 Mortgage duty will be required to be paid where the further amount advanced and secured by the mortgage exceeds the amount of the original loan and for which the original mortgage was stamped.  The purpose for which the further funds are to be used will determine which rate is applicable.

 The higher rate of 45 cents per $100 will be applicable in the following circumstances:-

 ·          Portfolio loan

Where a financial institution provides a customer with a portfolio facility (line of credit) that is used to purchase, for example, a house, shares, a car or a holiday, the higher rate of duty will apply to the entire portfolio, as the whole of the amount secured is not being used for a “home mortgage” purpose.

 ·          Upstamping

A customer borrows money from a Financial Institution to purchase a home to be used as his/her sole or principal place of residence (a “home mortgage”), and thereafter borrows further funds to purchase a house for investment purposes.

 In circumstances where a mortgage is upstamped for a purpose other than a “home mortgage” purpose, the higher rate of duty will apply to the new, upstamped portion of the loan.  The higher rate of duty will not apply retrospectively to the pre-existing portion of the loan. Where a customer subsequently borrows further funds for a “home mortgage” purpose, the higher rate of duty will apply to the additional upstamped portion of the loan as the whole of the amount secured by the mortgage is not for a home mortgage purpose.

 ·          Mixed purpose premises

If a person takes out a loan for the purchase of a business with a house attached (eg. a deli, a farm), the higher rate of duty will apply as the mortgage is being used to secure property that has both a commercial and residential purpose.

 ·          Consolidated loans

If a customer utilises a product that enables him/her to consolidate various personal and business loans under one loan arrangement, the higher rate of duty would apply to such an arrangement as it is not solely for a “home mortgage” purpose.

FURTHER INFORMATION

25/9/2003                                                        COMMISSIONER OF STATE TAXATION