Stamp duty (or transfer duty) is a tax payable to the Office of State Revenue (“OSR”) when a person acquires or purchases property such as land, house or rights to land. Chapter 2, Part 9 of the Duties Act 2001 (“Act”) provides concessions for stamp duty if a buyer meets certain criteria.

A buyer who buys a property to live in as his/her principal place of residence is eligible to apply for concession on the stamp duty. In some circumstance, such as a first time buyer, the concession may result in nil stamp duty assessment if the purchase price is less than $500,000.

To be eligible, the buyer must meet certain criteria such as:

• the buyer must be an individual,
• the buyer must occupy the property as his/her home within one year from the transfer date, or
• the buyer must not dispose of the land.

The word “dispose” above can mean a number of things, and it includes transferring (or selling), leasing/renting or granting exclusive possession of all or part of the land to another person.

Property Occupied By Tenants?

It is not uncommon for home buyers to purchase property with existing tenants in the property. In this scenario buyers must be careful with their dealings with the tenancy so as not to lose their eligibility for the duty concession.

Exceptions To The Rule

There are several exceptions whereby it will not be regarded as a disposal. One of the exceptions relates the tenant’s occupancy of the property after settlement.

A buyer is not regarded as having disposed of the property if:

1. The existing tenant occupies the property after settlement date but vacates at the end of the term of the current lease or within six months, whichever happens first.
2. The Seller remains in the property and occupies it after settlement date but vacate within six months after settlement date.

For exception one above to apply, the lease arrangement must have been in place before the settlement date. The buyer must not enter into a new lease with the tenant or with another person. The buyer is not allowed to renew or extend the existing lease. If the end date for the current tenancy agreement is longer than six months after settlement date, the buyer must make appropriate arrangement (including serving notices to vacate) to ensure the tenant vacates the property within six months.

Failure to adhere to this requirement will result in the buyer being deemed as having disposed of the property and losing the eligibility for the duty concession. The property acquired will be regarded as an investment property and the OSR may demand payment of stamp duty assessed based on investment rate plus any unpaid tax interest (“UTI”) from the date the duty was deemed due.

Whilst a failure to meet the criteria is not an offence, failure to notify the OSR of the change of the circumstance and to have a reassessment done is an offence and the maximum penalty is $11,000.

Property Occupied By Tenants Case Example

We have seen a scenario whereby a home buyer failed to remove the tenant from the house for a period of two weeks after the six months period has expired. Three years later the OSR did a random audit and found the owner to have failed to comply with the requirements. The owner had to pay back not only the concession received (which the owner would have avoided had the tenants vacated just two weeks prior) but also UTI accrued for the last of three years until the duty was fully repaid.

Some buyers make the wrong assumption that as long as the tenants vacate at the end of the current lease term regardless of the end date, they can get avoid stamp duty. This obviously isn’t the case.

If in doubt, buyers are encouraged to seek legal advice.

How We Can Help

Our Lawyers are highly experienced with all types of property matters. If you are not sure about whether your property transaction is exempt, or if you have not adhered to the requirements, make sure you consult an experienced property lawyer who practises exclusively in this complex area of law.

Contact Us

Get the best representation. Contact us on 1800 999 529, email mail@rmold.newwebsite.live, or submit an enquiry below.

We are available to meet with you at any of our local offices (Brisbane, Gold Coast, Beenleigh, Cleveland and Jimboomba) or by telephone or video-conference.

This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.

This article was originally published on the 11^th of September 2022. It was last updated on the 24^th of November 2022.