Stamp Duty Case Studies

Hiring Duty

Hiring duty is chargeable on the hiring of goods by the person who hires out the goods. The duty is payable by reference to the hiring charges. The rate differs between the States and Territories and also depends upon the type of hiring arrangement. For commercial hire businesses, the duty is generally payable by monthly return to the respective revenue authorities. The calculation of the correct duty to be returned to the revenue offices has, in many instances, proved not to be as straightforward as it first appears.

For example, the PwC Stamp Duty team successfully negotiated refunds of around $2m for a finance company in relation to overpayment of hiring duty in connection with finance leases. In another instance, a company became aware of non-payment of hiring duty where a significant amount of duty and penalties were potentially payable. Our stamp duty team worked together with the company to address these issues. A successful outcome was achieved in all respects as follows:

• Penalties were remitted in nearly every jurisdiction in which voluntary disclosure was made
• The correct amount of duty was payable
• The client now had an accurate methodology to pay the correct amount of duty
• There was no audit conducted by the revenue authorities.

Insurance Duty

Broadly, insurance duty is imposed on life insurance and general insurance. For life insurance, insurance duty is imposed in the jurisdiction where the insured person resides at the time the policy is effected. For general insurance, insurance duty is imposed in the jurisdiction where the property or risk insured is located.

Some of the highest rates of stamp duty are applicable to policies of general insurance (for example, 11% of the premium in South Australia). Generally, insurance duty is imposed on the insurer although the insured may be liable in certain situations. Issues have arisen in practice for corporate groups that insure under a global insurance policy that includes property or risk in Australia. In these circumstances, the insured may be liable for the insurance duty.

The PwC Stamp Duty team has assisted multi-national corporate groups in determining whether there is a liability for insurance duty on a global insurance policy. In such cases, it is necessary to review the policy and understand the nature of the insurance in order to identify whether there is any nexus or connection with an Australian jurisdiction so that a liability arises. In many cases, the requisite nexus has been absent so that a liability does not arise.

Land Rich Duty

Land rich duty can apply to relevant acquisitions in entities or groups that have significant land holdings. The duty is imposed at land transfer rates in the relevant jurisdiction by reference to the value of the underlying land, equivalent to the percentage interest acquired. There are many examples where the PwC Stamp Duty team has assisted clients in addressing land rich issues. Often stamp duty savings to the purchasers have been significant, potentially running into the tens of millions of dollars. For the vendors, the benefits are translated into higher sale prices. Examples of such assistance include:

• Properly characterising the nature of the assets concerned
• Properly drawing on valuation evidence
• Structuring the acquisition appropriately
• Successfully negotiating with revenue authorities.

Mortgage Duty

Broadly, mortgage duty is payable on an instrument of mortgage or charge over property in the State based on the amount of advances secured. Generally, the rate of duty is 0.4% of the amount secured - but may differ depending on the State. If the mortgage duty implications of a secured financing arrangement are addressed at the earliest possible time, the greater would be the opportunity that:

• "Double duty" consequences are eliminated
• No mortgage duty is payable
• The stamp duty payable on existing securities (if applicable) may be effectively utilised for other financing arrangements.

Transfer (Acquisition) Duty

Broadly, stamp duty is payable on the transfer of (certain) assets and property in all States and Territories based on the higher of the consideration paid for, or unencumbered value of, the property acquired. The maximum stamp duty rate can be as high as 6.75% - depending on the jurisdiction. One of the many factors to consider in entering into a transaction is stamp duty. The earlier the stamp duty implications are considered, the better the opportunities for more favourable stamp duty outcomes. However, not all may be lost if the transaction is already under-way.

For example, the PwC Stamp Duty team was asked to provide assistance with a transaction that had already commenced. Not only did the team identify further significant stamp duty savings in the implementation of the transaction (the savings were in the millions of dollars), they also negotiated successful outcomes with various revenue authorities.