The assessment of stamp duty is a matter of perspective, with the key states of New South Wales, Victoria and Queensland each adopting their own unique approach to the way transfer duty is assessed on sales of retirement village businesses in those states.
With the abolition of transfer duty on non-real property business assets in New South Wales and important developments in Queensland and Victoria, it is timely to review the stamp duty treatment for sales of retirement village businesses in those three key jurisdictions.
On 23 June 2016, the Queensland Commissioner of State Revenue released a revenue ruling on sales of retirement village businesses. The ruling explains that where the purchaser of a retirement village has an obligation under the retirement village legislation to pay exit entitlements to outgoing residents (RefundObligation), the amount of the Refund Obligation is a statutory liability that is not ‘assumed under the transaction’ and therefore does not form part of the consideration for the transaction.
The ruling only addresses part of the equation and does not offer any guidance as to whether the statutory charge over the retirement village land to secure the residents’ entitlements (Statutory Charge) affects the unencumbered value on which transfer duty may be assessed.
The Victorian State Revenue Office has a different perspective on these issues. The Victorian SRO regards the value of the Refund Obligation as both part of the consideration for the transaction and also as part of the unencumbered value of the land. But the Victorian SRO may be willing to accept (on a case by case basis) that the value of the Refund Obligation is only nominal where it is reasonable to expect that the Refund Obligation will be funded by ingoing contributions collected from new residents. This mirrors the longstanding approach in South Australian (an approach which is currently under review by RevenueSA).
New South Wales
The approach in NSW is different again. The long-awaited abolition of NSW transfer duty on non-real property business assets came into force on 1 July 2016 but this does not mean the NSW Office of State Revenue will follow the approach of the Victorian SRO.
If the Refund Obligation can be attributed to real property transferred to the purchaser of a village, NSW transfer duty may be assessed on the face value of the Refund Obligation as a component of the consideration. It may not be enough for the vendor and purchaser to simply allocate the value of the Refund Obligation benefit to non-real business assets, particularly if the Refund Obligation is a charge on the land. For this reason care should be taken when setting up new retirement villages in NSW to ensure resident loans do not form part of the Refund Obligation attaching to the retirement village land.