In brief - You have six months from settlement to commence construction
This is an urgent reminder for builders and others who have acquired vacant land under the Home Builders Bonus (HBB) stamp duty exemption.
It is a condition of the exemption that you start building within 26 weeks of settlement.
If you do not, the Commissioner may require you to pay the stamp duty on the property.
How is "commencement of construction" defined by the Office of State Revenue?
If you received the exemption, construction of the proposed dwelling must start no later than 26 weeks after the settlement date.
The NSW Office of State Revenue considers pouring of the slab or construction of the foundations as commencement of construction. It does not consider pre-construction inspections, surveys or reports to be commencement of construction.
There is no time frame for the dwelling to be completed.
What to do if commencement of construction has been delayed
If there is a delay in the commencement of construction, application can be made to the Commissioner for an extension of the construction commencement date.
The application for an extension of the construction commencement date can be made by letter to the Commissioner outlining the reasons for the delay. Reasons for delay can be such causes as:
- delay in approval from the relevant consent authority
- delay in commencement due to inclement weather
- any other delays which are beyond the control of the applicant
The letter should also outline the length of the extension being requested.
The granting of an extension of the construction commencement date is at the absolute discretion of the Commissioner.
What to do if construction will not commence
If for any reason the intended construction on the subject vacant land will not proceed and the HBB stamp duty exemption has been obtained, the owner of the subject vacant land is no longer eligible for the HBB stamp duty exemption. Such situations include:
- the land remaining owned but vacant for a period of time exceeding 26 weeks from the settlement date with no intention of building a dwelling
- the land being onsold to a third party as vacant land
In such situations, the recipient of the HBB stamp duty exemption must relodge the purchase contract for sale which had been stamped with the HBB stamp duty exemption with the Office of State Revenue for reassessment and stamping.
The stamp duty payable in relation to the reassessed contract is the stamp duty which would have been payable on the purchase price but for the HBB stamp duty exemption, plus interest.
The interest is calculated from the date the duty would have been due (normally three months from the contract date) up to the date of actual payment of the duty. Application can be made to the Commissioner to waive the interest. Once again this is at the absolute discretion of the Commissioner.
The documents to be provided to the Office of State Revenue when lodging for stamp duty reassessment are:
- original contract for sale stamped with HBB stamp duty exemption
- copy of the originally stamped transfer
- cheque for the stamp duty amount
- letter setting out reasons for non-commencement and requesting that interest on the stamp duty be waived
If HBB exemption is lost on multiple lots, stamp duty may need to be aggregated
If you have purchased a number of lots from the same vendor at the same time and received HBB exemptions on all the lots, just remember that if more than one lot loses the HBB exemption, the stamp duty payable on those now assessable lots may need to be aggregated.
Registered builders are generally eligible for an exemption from aggregation of stamp duty, subject to the lodgement of the relevant declaration form. This form should be lodged at the same time as the application for reassessment.
This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.