ACT versus NSW — stamp duty on put & call option deeds

A Put & Call Option Deed (‘Deed’) is an agreement entered into between two parties now, whereby the subject of the agreement is to enter into a further agreement (ie a contract for the sale of land) at a later point in time.

Stamp duty in the ACT & NSW generally

Liability for stamp duty in the ACT and NSW generally arises when an instrument is entered into (for example, an exchange of contracts for the sale of land).

The person acquiring the property must pay stamp duty by the earlier of completion of the contract, or 90 days from the date of exchange. However, in some circumstances, this period of time may be longer (for example, in an off the plan contract).

Stamp duty on put & call option deeds in the ACT

In the ACT, an option to purchase land (known as a ‘call option’) is dutiable property, such that duty is payable if the call option is transferred/assigned to a third party.

This means that if you are a buyer who is granted a call option and you assign the rights under the call option to someone else, that person receiving the call option rights will pay stamp duty on the dutiable value of the call option.

Stamp duty on put & call option deeds in NSW

In NSW, there are 2 additional circumstances where stamp duty may be incurred:

  • where a call option is exercised nominating a third party as the buyer under the contract, stamp duty is payable on the nomination fee paid by that third party and
  • the holder of a call option is liable to pay Call Option Assignment Duty on the transfer of the option to a third party, OR nomination of a buyer (under the contract). The amount payable will be based on the dutiable value of the property.

Call Option Assignment Duty only applies where the seller has an option to sell land (known as a ‘put option’) under the Deed. It does not apply if the Deed only grants a call option.

Two key exemptions from the payment of Call Option Assignment Duty are:

  • the Deed was entered into for the sole purpose of the buyer obtaining funding or
  • the call option is assigned to a third party, or a third party is nominated as a buyer under the contract, and the third party is a member of the same corporate group as the assignor/nominator.

How does this affect you?

When considering purchasing property in the ACT or NSW, there are many considerations which must be taken into account and stamp duty on the purchase can often be overlooked.

A Put & Call Option Deed is an alternative option providing flexibility to the buyer to transfer the call option or nominate an alternative buyer of the property.

However, stamp duty will be an expense for both seller and buyer in some circumstances.

If you are in the market for the purchase of a residential or commercial property, it is always best to seek legal and financial advice before entering into a contract so that you are aware of all the obligations which may arise.

For more information contact the Commercial, Property and Finance Team:

Christine Murray | Partner
(02) 6279 4444