The proposed South Australian budget contains a number of big changes to stamp duty and at first glance they look like they may be of significant impact, at least for businesses.
Stamp duty on commercial land (excluding primary production) is being phased out over 3 years and duty on transfers of “non-real property” is meant to be abolished effective immediately. The idea is that businesses can now be bought and sold without having to pay any stamp duty, except for that on any land owned by the business. And even then it will be much cheaper to buy commercial property.
The reason that I’ve put the term “non-real property” in quotes above is that from a lawyer’s perspective it means all property that is not land, but the government’s definition seems to be a bit different. For example, the information circulars from RevenueSA refer to new exemptions relating to vehicles owned by disability service providers and another one for unit trusts. If the government were abolishing duty on everything but land, then it would follow that transfers of motor vehicles and unit trusts will already also be free from duty.
I don’t yet have a copy of the Bill for these amendments and so cannot check what they mean. If it truly does involve the abolition of stamp duty for all non-real property then the impact of the changes will be even greater, including because it might lead to more property being transferred into trusts and more amendments to trust deeds to change control of the trusts as part of estate planning and asset protection. [Update 20/6] Looking at the Bill, it does look like the government intends it to cover everything not connected with land, but whether that is the final outcome remains to be seen.
Stamp duty has been one of the major reasons that many larger partnerships don’t incorporate, especially for professional services firms. This may change that, and especially where there are applicable capital gains tax exemptions. Incorporation often provides a far greater level of asset protection.
From a litigation perspective, one of the inevitable flow on effects is that there will probably be a greater number of attempts by failing businesses to restructure with a view to defeating creditors, because you can now do that without having to pay stamp duty. Whilst powers exist to set aside many of those types of transactions, their ease may still make things more difficult and costly.
One of the other big changes is the introduction of an exemption for transfers by family members into special disability trusts. Special disability trusts allow property to be held for the benefit of a person who qualifies for a disability support pension (and fits other criteria) without it affecting their pension and benefits in the ordinary way. There are various rules and requirements for these types of trusts, including as to how income is used, but they can be of great advantage to families. Most people taking advantage of these trusts used to do it as part of a will—upon their death giving the land to their child—but with the stamp duty exemption it may well be better to set up the trust earlier.