In brief - New duty applies to any call options in existence before new regime takes effect

Stamp duty will now be payable when a call option holder, for valuable consideration, relinquishes his or her rights under an option, so that another person obtains a right to purchase the property.

New tax from the NSW state budget

New South Wales budget changes in the State Revenue Legislation Amendment Bill 2013 mean that stamp duty will be payable when a call option holder, for valuable consideration:

  • nominates another person to exercise an option, or
  • nominates another person as purchaser or transferee of the land, or
  • agrees to a novation of an option, or
  • otherwise relinquishes his or her rights under an option, so that another person obtains a right to purchase the property.

In each instance, the transfer of an option to purchase land will be deemed to occur. Any such transfer is already dutiable under NSW law.

Where the new provision applies, duty is calculated on the greater of the consideration provided for the nomination or novation, and the value of the option.

The new duty regime applies to any call options in existence before the date of coming into effect of the new duty regime. It is the date of the assignment for novation of the interest in the call option that is relevant, not the date of the underlying option documentation.

Examples of how the new stamp duty works

An option holder obtains the right to purchase land for $1,000,000 by paying an option fee of $200,000 to the land owner. If the option is exercised, the option fee will be credited to the purchase price.


Duty consequence
The option holder receives no consideration.
No additional duty.
The option holder is paid a $200,000 nomination fee.
The option transfer date is deemed to be the earlier of the date that the nomination notice is served and the date that the option is exercised.
Duty is payable on the consideration for both:
  •  the nomination ($200,000) - with duty payable by the nominee within three months of the option transfer date.
  •  the property transfer ($1,200,000 ie the purchase price plus the nomination fee) - with duty payable within three months of the option exercise date. However, a credit will be allowed for any duty on the nomination fee already paid.
The option agreement is "torn up" and $200,000 is paid to the original option holder.
Duty is payable on the consideration as above.

Broad meaning given to "valuable consideration"

Additional duty will be payable only where the "transfer" is made for "valuable consideration".

It is important to remember that in a duties context "consideration" is given a broad meaning. It includes not only monetary compensation, but potentially whatever else may "move the bargain". For example, consideration might take the form of:

  • reimbursement of option fees paid by the original option holder; or
  • forgiveness of a debt owed by the original option holder; or
  • other benefits given to the original option holder.

Date of effect of new stamp duty provisions

The new provisions were due to take effect from whichever was the later of 1 July 2013 and Royal assent. At the time of writing of this article, the Bill has not yet received Royal assent.

Interaction with put and call option duty

The new statutory provisions supplement but are different from the put and call option assignment duty which imposes duty on the option holder based on the value of the property which is the subject of the option.

However, the new statutory regime only imposes duty on the higher of the value of the consideration for the novation or nomination, and the call option value.

Further, with call option novation duty, the new statutory regime allows a credit for the duty paid under this regime against the duty ultimately paid on the acquisition of the property. Effectively, this just brings forward payment of part of the duty, but does not add additional duty to the extent that duty is paid on a reimbursement of the original option fee or any extension fees under the option agreement.

However, the duty is additional duty where a premium is paid for the nomination or novation.

Payment for handing over benefit of call option is not a fee for a service

Care needs to be taken when describing the uplift fee that is paid. If there is a genuine fee for service, then this is probably not subject to the new duty regime.

However, parties cannot artificially categorise something as a fee for service when it is in fact a payment for handing over the benefit of a call option.

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 or financial advice. Please seek your own legal or financial 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.​

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