Care has always have to be undertaken when designing a commercial transaction to ensure that double duty is not incurred in what essentially is in reality the one transaction. One of the problems can be where a purchase is undertaken and the Commissioner may construe that transaction as both a sale of the underlying property and a declaration of trust over that same underlying property. The Commissioner has issued a ruling DUT 31 which if followed carefully can avoid this problem.
Nevertheless the issue has arisen in a recent Supreme Court decision. In this case, there was a sale of shares in a NSW company (the sale of which are still subject to stamp duty in NSW), the consideration being the issue of shares in another company to be held by another company as nominee for the vendors i.e. there was a scrip for scrip offer.
The Commissioner argued that the provision requiring the consideration shares to be held as nominee constituted a declaration of trust and hence in addition to the ad valorem duty on the sale of the shares there was also ad valorem duty on the issue of the consideration shares as a declaration of trust i.e. there was double duty with respect to the sale of the shares.
The Court held that at the time the agreement for sale of shares was entered into by the parties, the consideration shares were not in existence. In order for there to be duty on a declaration of trust, the property over which the trust was declared had to be in existence at the date of that declaration of trust. There was no duty imposed on a declaration of trust over future property.
Therefore there was no double duty in this instance because the consideration shares were not in existence as at the date of the agreement. Accordingly the agreement was only to be assessed once as a sale of dutiable property.