Summary
- In New South Wales, stamp duty on leases was largely abolished in 2008, but it still applies in specific circumstances, including premium payments, lease transfers, and lease surrenders.
- Retail tenants are generally exempt from stamp duty, as key money payments – which include premiums – are prohibited under retail leases.
- A nominal $10 duty applies to voluntary lease surrenders and transfers, even where no money changes hands.
- This article is a plain-English guide to stamp duty on commercial and retail leases in New South Wales, aimed at business owners and tenants.
- The content has been prepared by LegalVision, a commercial law firm that specialises in advising clients on leasing and property transactions.
Tips for Businesses
Check whether any upfront payment to secure your lease qualifies as a premium – if it does, stamp duty applies. Always budget for the nominal $10 duty on transfers and voluntary surrenders. Retail tenants should confirm that no key money is being requested, as this is prohibited and triggers duty obligations.
Stamp duty is a tax that’s imposed on the purchase of assets and transactions of property. If you are transferring or surrendering a lease, chances are, you will have been asked to pay stamp duty. So, when is it payable and when is it not? In 2008, New South Wales abolished stamp duty on new leases. However, there are still certain circumstances where you, a tenant, must pay stamp duty under a commercial or retail lease. This articles sets these out below.
This guide will help you to understand your options when you purchase a business with leased premises.
Creation of Lease
You must pay stamp duty on a new lease only where you make a lump sum payment to encourage the landlord to grant the lease.
The landlord usually sets this amount, and you may negotiate it. However, note that as long as an amount is payable, this will be a capital payment (i.e. the actual amount paid upfront). If it is a capital payment, it will be subject to stamp duty.
Retail Leases
For retail leases, key money payments are not permitted. The definition of key money includes premium payments. As such, if you are a retail tenant, it is unlikely that you must pay any stamp duty on the registration of a retail lease.
Premium Payment v Up-Front Rent
There is a difference between premium payments and rent up-front or in lump sum instalments.
The payment must be considered a capital payment. In general, if you pay a sum simply to gain access to the right to lease, rather than the use of the premises, this is likely to be considered a premium. Payments made for the use of the premises will be seen as ordinary rent, and no duty is required.
Exempt Leases
Some leases are exempt from stamp duty even if a premium is payable. These include leases:
- of units in a retirement village;
- of premises to the Home Care Service of NSW; or
- for approved nursing homes.
Transfer of Lease
You must pay stamp duty on the assignment or transfer of a lease. The amount will depend on whether you are paying any money specifically for the transfer.
Even if you are not paying any money for the transfer, you must still pay a nominal sum of $10 for each time you transfer your lease to the NSW Office of State Revenue. The Land and Property Information office is unlikely to accept a transfer without the nominal stamp duty, which will, in turn, delay the assignment.
As the assignment or transfer of a lease often occurs together with the sale of a business, there may also be other dutiable amounts payable.
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Surrender of Lease
Finally, the surrender of a lease is also subject to stamp duty. This is where you voluntarily give up the lease to the landlord before your lease term has expired.
The amount of duty will also depend on the specific circumstances of the surrender. If the landlord requires you to surrender the premises and pays you an amount as compensation, then this amount is subject to duty.
On the other hand, if you voluntarily surrender the lease, then similar to the lodgement of a Transfer of Lease form, you must pay a nominal $10 assessment duty.
Key Takeaways
Stamp duty is generally not payable on the registration of a lease unless key money or a premium has been paid. In addition, stamp duty will not be payable for the registration of a retail lease. You will have to pay a nominal $10 for a transfer or voluntary surrender of a lease if no other money is specifically being paid.
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Frequently Asked Questions
Stamp duty is payable if a premium is paid to secure the lease, such as key money or an upfront capital payment.
Generally, no stamp duty is required for retail leases, particularly concerning key money payments, which are not permitted in retail leases.
Yes. If your landlord compensates you to surrender the premises, that amount attracts duty. If you voluntarily surrender, you pay a nominal $10 assessment duty.
Yes. Retirement village units, premises leased to the Home Care Service of NSW, and approved nursing homes are all exempt.
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