Transfer duty, or stamp duty generally, is a “tax” that can apply when you sell, buy or transfer dutiable property. This type of duty is charged on ‘dutiable transactions’ which are identified by the duties legislation in each respective state and territory. The Duties Act 1997 (NSW) (‘the Duties Act’) governs these transactions in New South Wales.
From 1 July 2016, New South Wales will abolish duties payable on the transfer of certain business assets identified in the Duties Act. These business assets will therefore no longer be subject to stamp duty, opening up a wide range of restructuring opportunities for business owners.
Exempt Business Assets will include:
- The Goodwill of a Business;
- The Intellectual Property; and
- Any Statutory Licences/Permissions.
The goodwill of a business is viewed as a special type of intangible asset that represents the value of a business. This includes the people, ideas, ongoing success and profits that the business generates. The value attributed to this type of asset is determined by the individual business, the related industries and the current state of the market at the time of transfer.
The goodwill of a business will no longer be subject to stamp duty when transferred, if the business supplied goods in NSW or provided services in NSW to a customer of the business during the previous 12 months.
Intellectual Property (‘IP’)
Intellectual property is intangible property that results from creativity and inventions which are viewed as valuable business assets. This can include the businesses name, trading names, domain names, trademarks, industrial designs, patents, registered designs, copyrights and any other associated rights by way of agreement.
Intellectual property as an exemption will apply where the intellectual property has been used or exploited in NSW during the previous 12 months , but only if the intellectual property is the subject of an arrangement that includes a dutiable transaction over the goodwill referred above .
Statutory Licences and Permissions
A statutory licence or permission granted by Commonwealth or New South Wales law allows you to lawfully carry on your business and is also considered a valuable business asset.
These licences and permissions can include examples such as liquor licences, water licences, taxi licences and any Gaming Machine entitlements included within the meaning of the Gaming Machines Act 2001(NSW). Statutory licences permit the legal use of Intellectual Property as described above. The owner of such property can grant the user permission by way of statutory licence to exploit an asset in exchange for the payment of fees or royalties.
Relevant statutory licences or permissions under Commonwealth and New South Wales laws will no longer be subject to stamp duty when transferred if the rights under the licence or permission were exercised in NSW in the previous 12 months.
Opportunities to restructure
Traditionally stamp duty has been a significant barrier to business owners wanting to restructure their business. From 1 July however, eligible transfers of business assets will be exempt from stamp duty.
Coupled with the newly introduced Small Business Rollover which also comes into effect on 1 July 2016, business owners now have the opportunity to change and modify their business structures without incurring stamp duty or CGT.