Conveyance by direction

Status: Replaced on 7 December 2018 - View Current Version
Version Number: 1
Legislation: Stamp Duties Act 1923
Date Issued: 16 January 2015

Revenue Rulings do not have the force of law.

Preamble

In a majority of situations involving the sale of land, the transferee named in the Memorandum of Transfer (“Transfer”) is the same person named as the purchaser in a contract for the sale of that land (“Contract”). In such cases, duty is only imposed on the Transfer.

However, where the purchaser and transferee are not the same, it has previously been RevenueSA’s practice to require the production of certain further documentation to explain the difference.

RevenueSA has determined to amend the following practices as explained in this Ruling.

Discussion

Letter of agency

In cases where a Contract was executed “and/or nominee” and the transferee named in the Transfer was not the purchaser named in the Contract, a letter of agency dated prior to the Contract, which authorised a person or entity to act on behalf of the transferee in order to enter into the Contract on their behalf (“Letter of Agency”), was previously required. In such cases, duty was only imposed on the Transfer.

Assignment

In cases where the purchaser and transferee were not the same, and:

• the Contract was not executed by the purchaser “and/or nominee”;
• no Letter of Agency predating the Contract existed; or
• the Letter of Agency post-dated the Contract;

an assignment, which assigns the purchaser’s interest in the Contract  to the transferee (“Assignment”), was previously required.

In such cases, duty was charged on both (i) the Assignment, calculated on the greater of the consideration paid for the Assignment or the full market value of the interest assigned and (ii) the Transfer, on the full market value of the land conveyed. In the majority of situations, the amount assessed on the Assignment would be equal to the deposit paid by the purchaser under the Contract, unless the market value of the land had increased since the date of the Contract.

Ruling

RevenueSA has amended these practices and will no longer require production of a Letter of Agency or an Assignment in the above circumstances.

RevenueSA also acknowledges that the purchaser under a Contract has a common law right to direct the vendor to transfer the land at settlement to any person or entity the purchaser desires. This common law right exists irrespective of whether the purchaser has executed the Contract “and/or nominee” or not.

However, where an Assignment is still executed (e.g. where a transferee requests an Assignment of the purchaser’s contractual interest to them), duty will continue to be payable on the Assignment, calculated on the greater of the consideration paid for the Assignment or the full market value of the interest assigned. In the majority of situations, the amount assessed on the Assignment will be equal to the deposit paid by the purchaser under the Contract, unless the market value of the land has increased since the date of the Contract. In addition, duty is also payable on the Transfer on the full market value of the land conveyed.

Section 68 of the Stamp Duties Act 1923

This Ruling does not change the manner in which Section 68 of the Stamp Duties Act 1923 (the “Act”) will be applied by RevenueSA.

In this regard, where there is an Assignment of the Contract for consideration, whether for the deposit alone or including a premium, and the transfer is in favour of the assignee, Section 68 of the Act will not apply, as has been the practice to date (though, as discussed above, duty is payable on the Assignment). Further, where there is no Assignment of the Contract, any reimbursement of the deposit by the named transferee to the contracting purchaser (whether on behalf of the transferee or otherwise) will not be considered to constitute a further sale for the purposes of Section 68 of the Act provided it is the only amount reimbursed.

However, notwithstanding the above common law right, where there is a further sale of property to a subpurchaser that falls within any of Subsections 68(3), (4) or (5) of the Act, duty will be payable as follows.

Subsection 68(3) of the Act provides that the contracted resale of a property, prior to its conveyance to an original purchaser, to any other person other than the original purchaser, will be chargeable with duty as:

• a conveyance to the original purchaser on the consideration for the sale; and
• a conveyance by the original purchaser to the subpurchaser on the consideration for the sale.

Subsection 68(4) of the Act provides that the contracted resale of the whole or any part or parts of a property, prior to its conveyance to an original purchaser, to any other person(s) other than the original purchaser, will be chargeable with duty as:

• a conveyance to the original purchaser on the consideration for the sale; and
• a conveyance by the original purchaser to the subpurchaser(s) on the consideration for the further sale(s).

The consideration for the sale to the original purchaser in respect of each part or parcel shall, for the purposes of this subsection, be ascertained by determining the ratio which the value of the part or parcel in question bears to the value of the whole property.

It is to be noted that Section 67 of the Act, which empowers the Commissioner of State Taxation, in determining the duty chargeable in certain instances, to aggregate the sum of amounts on multiple instruments that would otherwise be assessed separately at lower marginal rates, may apply depending on the particular circumstances of a given matter.

Subsection 68(5) of the Act provides that duty is chargeable on:

• the conveyance to a subpurchaser of the interest of the person selling to them on the consideration moving from the subpurchaser; and
• the subsequent conveyance of the property by the original seller to the subpurchaser on the consideration for the sale to the original purchaser.

View this Revenue Ruling as a PDF (PDF 246KB)