Stamp duty hikes approved by Senate
Stamp duty payable on lease agreements will rise sharply on April 1 after the Senate approved amending legislation.
The Stamp Duty Amendment Act 2019, which was passed by the House of Assembly on March 15, introduces a new fee schedule that is based on a percentage of the aggregate rent payable under a lease. It replaces a flat rate fee schedule under which the maximum charge was $400.
The new stamp duty rate is 1 per cent of the aggregate rent payable for the first three years of a lease, and 0.5 per cent of the aggregate rent payable for any additional period beyond three years.
For a one-year lease on a property attracting a monthly rent of $5,000, the new fee will be $600, an increase of $200 over current rates. A three-year lease on the same property will attract stamp duty of $1,800, a rise of some $1,400 over current rates.
Sharper increases will materialise in the case of multiyear leases of larger spaces such as commercial property.
A commercial lease of 5,000 sq ft of space at the typical rate of $40 per square foot per year over three years, will result in stamp duty of $6,000, a $5,600 increase on the current flat fee of $400.
A ten-year lease on the same property will result in stamp duty of $13,000, an increase of $12,600 over the current rate.
Stamp duty must be paid within 30 days of the execution of a lease.
The amending legislation passed in the Senate on Wednesday without changes, meaning that it includes a flaw identified by a leading property lawyer who spoke to The Royal Gazette on the condition of anonymity.
“The way the new rates are framed, prevents one from calculating the stamp duty that will need to be paid on leases that include open market and consumer price index-based rent review provisions,” the lawyer said.
“In such cases, you won't know what the stamp duty should be because it's not determinable. You will have no choice but to send it to the Tax Commissioner's Office for adjudication, or to determine the stamp duty that should be paid.”