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Client Update: NSW to abolish ad valorem land transfer tax

11 May 2011

In brief: The New South Wales Government has confirmed its pre-election promise to abolish the Torrens assurance levy. Partner Victoria Holthouse (view CV) and Lawyer Vanessa Kingston look at the amending legislation that will abolish the ad valorem levy with effect from 1 July 2011.

Background

Since 1 July 2010, all transfers of land having a value of more than $500,000 in NSW are subject to an ad valorem or 'according to value' land transfer levy. The levy is payable by the purchaser to the Land and Property Management Authority NSW (LPMA) and is in addition to the nominal lodgment fee charged by the LPMA, and stamp duty. Currently, the levy is imposed at a rate of 0.2 per cent on land transfers valued between $500,000 and $1 million and at 0.25 per cent on land transfers that exceed $1 million.

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Changes

The Real Property Amendment (Torrens Assurance Levy Repeal) Bill 2011 (NSW) (which was introduced into Parliament on 9 May) will repeal those provisions of the Real Property Act 1900 (NSW), so that there will no longer be an ad valorem levy payable in relation to land transfers from 1 July 2011. Importantly, the Bill provides that the levy will still apply to transfers executed to give effect to a contract for the sale of land entered into before 1 July 2011 but lodged with the LPMA after 1 July 2011.1 The LPMA will therefore presumably rely on the contract date recorded on the notice of sale that accompanies the transfer at lodgement in determining whether the ad valorem levy applies after 1 July 2011.

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How do the changes affect you?

If the Bill becomes law, the ad valorem levy will no longer apply to contracts entered into or exchanged on or after 1 July 2011.

If you are a purchaser of land where the purchase price exceeds $500,000, you should keep in mind that the levy will still be imposed where the contract is entered into or exchanged before 1 July 2011, even when settlement occurs after 1 July 2011, as it is the date of the contract that is the key date for determining whether the levy applies.

Footnotes
  1. Section 26 of the Bill.

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