Transfers Made In Conformity With An Agreement For Sale

Revenue Ruling
Public Ruling

Ruling Number:	PUB-DT-2002-5
Title:	Transfers Made In Conformity With An Agreement For Sale
Tax Line:	Duties
Legislative Reference:	Duties Act 2001
Previous Ruling:
Date of Ruling:	15/05/2002
Attachments:

Preamble

Chapter 2 of the Duties Act 2001 (‘the Act’) imposes duty on certain transactions. Those "dutiable transactions" are set out in Section 6 of the Act. The effect of imposing duty on those "dutiable transactions" is that on certain occasions, duty may be payable twice on what amounts to the one transaction. For example, an agreement for sale is dutiable, as is the instrument that effects the actual transfer of dutiable property. Therefore, without any legislative relief, duty would be payable at the full ad valorem rate on both instruments.

To overcome this ‘double duty’ scenario – and other scenarios where the effect is to charge duty twice for effectively the one transaction, Section 16 of the Act sets out certain exemptions from duty and certain concessional rates that apply in specific given circumstances.

Subsection 16(1) of the Act provides that where a single dutiable transaction is effected by more than one instrument (for example a transfer of land and a transfer of a Crown Land licence), one instrument is stamped with the full ad valorem duty and each other instrument is chargeable with a concessional rate of $20.

Subsection 16(2) of the Act provides that the duty chargeable in respect of a transfer of dutiable property ‘made in conformity’ with an agreement for the sale or transfer of the dutiable property is $20 if the duty chargeable in respect of the agreement has been paid.

Subsection 16(3) of the Act provides that if ad valorem duty was paid on a transfer made in conformity with an agreement for the sale of real property, duty is not payable on that agreement provided that duty was paid on the transfer within 3 months of the date of execution of the agreement.

Both these sections require a decision to be made as to whether or not the ‘transfer’ is made in conformity with an agreement for sale.

Subsections 16(4), (5) and (6) set out a concessional rate that is payable where the transfer is NOT in conformity with the agreement for sale but where certain other circumstances or conditions are met.

Subsections 16(7), (8) and (9) provide for a concessional rate in certain other circumstances where a double duty scenario may arise.

This ruling relates to subsections 16(2) and (3) and specifically only to the meaning given to the words “transfer made in conformity”.

Ruling
Subsections 16(2) and (3) of the Act refer to the phrase “transfer … made in conformity with an agreement”. Jordan CJ in Lake Victoria Ltd v CSD (1949) 49SR (NSW) 262 discussed the meaning of the words "the conveyance made in conformity with the agreement". His Honour stated (at p 265):

His Honour later went on to state (at page 265):

"A conveyance is not made in conformity with the agreement unless it is made to the purchaser or if the agreement provides that it is to be made not to the purchaser but to some other person, to that person."

Dixon CJ in Vickery v Woods (1951) 85 CLR 336 made the following comment on Jordan CJ's observations (at pages 343-44):

"Jordan CJ distinguishes … the case where the conveyance to a third party is made at the purchaser's direction, from the case of a contract which provides for a conveyance to the purchaser, or if not the purchaser to some other person. In the latter case, I understand His Honour regarded the conveyance as made in conformity with the contract and not chargeable with ad valorem duty ... . Clearly enough Jordan CJ was here speaking of a person identified in the contract as opposed to any nominee, but I am not inclined to think it makes any difference if the identifiable person is a contemplated company yet to be clothed with legal personality."

The following principles will be applied by the State Revenue Office of Tasmania:

An agreement followed by a novation agreement, with the transfer to the purchaser named in the novation agreement, results in ad valorem duty being payable on each of the agreements and duty of $20 on the transfer. Consideration will be given to an application for refund on the first agreement pursuant to section 33(1) of the Act.
Where an agreement is expressed to be with a purchaser or his nominee (who is not identified in any way in the contract) and is followed by a transfer from the vendor to a person nominated, ad valorem duty is payable on both the agreement and the transfer.
An agreement with a purchaser acting on behalf of a company yet to be formed followed by a transfer from the vendor to the company after incorporation, there being no novation agreement, is chargeable with ad valorem duty, with the duty of $20 on the transfer. A copy of the certificate of incorporation of the transferee company should be produced when the transfer is presented for stamping. (Note: where the agreement is rescinded or annulled a refund of the original duty may apply. In those cases, full ad valorem duty would be payable on the transfer).
An agreement with a purchaser acting on behalf of a company to be formed, where the company is not named or identified, is chargeable with ad valorem duty, and where there is no novation, the transfer to the subject company will also be liable to ad valorem duty.
Where property the subject of an agreement is subsold under another agreement, each agreement will be liable to ad valorem duty. The transfer by the original vendor to the ultimate purchaser (or each transfer is there is more than one) will be liable to $20 duty.

Enquiries in relation to this Revenue Ruling should be directed to the Revenue Advice and Audit Section on telephone (03) 6233 5437 or email at audithelp@treasury.tas.gov.au. Copies of this ruling may be obtained from our website at www.treasury.tas.gov.au/tax and follow the "Revenue Rulings" link.

All rulings must be read subject to Revenue Ruling PUB-GEN-2001-1.

Peter Coe
COMMISSIONER OF STATE REVENUE