Despite some political argy bargy in the NSW Parliament last week, the law in NSW at the moment for the transfer of a right to buy under a call option is:
- an assignment of a call option is a dutiable transaction
- a nomination by way of novation may escape liability as a transfer.
The O’Farrell Government had introduced a bill into Parliament that, if passed in its original form, would have ensured nominations are taxed in the same way as assignments of options. However, the Baird Government conceded a number of amendments to the bill that was eventually passed by Parliament last week. In its final form, the bill was stripped of the measures relating to nominations of call options.
The Hon. Andrew Constance MP will hand down his first Budget on Tuesday, 17 June 2014. We will monitor the Budget for any developments affecting property developers.
Industry practice tip: Care should be taken to ensure that nominations under call options occur as a consequence of a novation by which new rights are vested in the nominee. There must be no inference that the original holder of the option has assigned those rights to the third party purchaser.