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Stamp duty refunds for developers

Stamp duty refunds for developers

Gary Chiert and Dorian Beaver discuss a new set of guidelines for reputable developers that include stamp duty refunds and a proposed rebate on surcharges.

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Ever wondered what makes a developer reputable? The New South Wales (NSW) Chief Commissioner will release guidelines on this and other particulars of the proposed developer rebate for NSW states taxes surcharges, which looks like being expanded based on a bill introduced in NSW.

A refresher on the surcharges and the refund

Foreign owned acquirers and owners of NSW land are charged significantly higher rates of stamp duty and land tax. Similar surcharges apply in most other states. Consistent with its policy of increasing the supply of new homes, the NSW Government passed legislation which provided for a refund of these surcharges for certain developers (although it was not yet in force).

A new bill has been released which expands the scope of the refund and even allows an up-front exemption for ‘reputable’ developers.

What has changed?

There new bill makes three important changes:

  • Developers who sell subdivided land for the purpose of constructing new homes will be eligible for the concessional treatment. Previously the concessional treatment only applied to developers who constructed and sold ‘new homes’. 
  • The new home or sub-divided land must be sold within 10 years of it being acquired by the developer. This has increased from 5 years due to industry concerns that larger or complicated projects can take longer than 5 years to complete. The purpose of the time limit is to prevent developers that land bank from being eligible for the concession. 
  • Certain developers are eligible to apply for an exemption up-front, rather than claim a refund after the land is sold. According to the second reading speech, this will be available for ‘reputable’ developers. The criteria for a ‘reputable’ developer is subject to guidelines, along with other details.

What has stayed the same?

  • Most of the details are still subject to guidelines, which are yet to be released.
  • The applicant must still be an Australian corporation. It remains to be seen whether corporations that are trustees of trusts or general partners of a limited partnership will be eligible, but it is expected to be addressed in the guidelines. 
  • The exemption/refund is still not part of the legislation, but developers who have priced the refund into their feasibility studies should receive some comfort in the way things are moving.

The proposed changes are good news for developers, especially the reputable ones, but until the guidelines are released there is still substantial uncertainty.

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