WESTERN Australian Government plans to accelerate the collection of stamp duty have been vigorously criticised by business brokers, property agents and settlement agents.
WESTERN Australian Government plans to accelerate the collection of stamp duty have been vigorously criticised by business brokers, property agents and settlement agents.
There is concern the change will cause serious cash flow problems for purchasers and adversely affect business and property sales.
The biggest impact would apply where transactions have an extended settlement period, such as business sales and ‘off the plan’ property sales.
Graham O’Hehir, managing director of WA’s largest business broking agency Goodwin Mitchell O’Hehir, said he was extremely concerned about the planned change.
“The accelerated collection of stamp duty on business sales will cause hardship to small business purchasers and major headaches for conveyancers,” he said.
It would result in business purchasers paying stamp duty well before transactions were due to settle.
It would also result in stamp duty being paid on many transactions that do not proceed, forcing individuals to subsequently seek a refund from the Government.
Mr O’Hehir said more than 30 per cent of businesses placed ‘under offer’ did not eventually settle.
The timing changes, which take effect from July 1, are part of new tax administration measures.
Presently, a business purchaser has at least six months to pay stamp duty from the time an offer is accepted. Under the new rules, that period has been halved to three months.
The new lodgement and payment rules coincide with a 15 per cent increase in stamp duty rates payable on conveyances.
Law firm McCallum Donovan Sweeney partner Ross McCallum, who is also a legal adviser to the Real Estate Institute of WA, said contingent con-tracts would be treated the same way as unconditional sale contracts.
“The timing starts when the offer is accepted by both parties,” he said.
“It doesn’t make any difference if there are conditions attached.”
Mr McCallum said he was recommending that agents started advising purchasers of the stamp duty liability.
Mr O’Hehir said the previous six-month period was generally sufficient to finalise a business sale.
That allowed the purchaser to finalise financing arrangements and gain access to the business cash flow prior to paying the stamp duty.
In future, business purchasers would need to ensure they had sufficient funds to pay the stamp duty.
Mr O’Hehir said business migrants would be seriously affected because there was often a long period between having an offer accepted and settling on the purchase. He said business migrants would be shocked to discover that they had to pay thousands of dollars in stamp duty weeks or months before taking over.
A spokesman for the Office of State Revenue said it was intended that purchasers would be able to apply for an extension of time to make their stamp duty payments.
There would also be provision for payment in instalments.
The process for making such applications had not been finalised.
The changes were finalised following consultation with representatives of four legal and accounting bodies: the Law Society, the Society of CPAs, the Institute of Chartered Accountants and the Taxation Institute.
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