Stamp duty must be now paid whenever there is a change in ownership of an option to purchase land regardless of whether that change in ownership is structured as a transfer, assignment, novation or nomination. The State Revenue Legislation Further Amendment Act 2014 (NSW) came into force on 23 October 2014. This Act amends the Duties Act 1997 (NSW) to impose stamp duty on nominations or novations of call options by treating them as if they are transfers and, therefore, dutiable with the duty calculated on the consideration given for the option.

The legislative amendments ensure that certain transactions involving options to purchase land are dutiable in the same way as a transfer of an option to purchase land. The amendments provide that a transfer of an option to purchase land in New South Wales is taken to occur if, for valuable consideration:

1. another person is nominated to exercise the option; or
2. another person is nominated as purchaser or transferee of the land the subject of the option on or before the exercise of the option; or
3. the option holder agrees to a novation of the option, or otherwise relinquishes rights under the option, so that another person obtains a right to exercise the option or to purchase the land.

Changes are also made to the calculation of duty payable on the purchase of land that occurs from the exercise of an option:  the consideration for the land is taken to include the amount or value of the consideration provided by or on behalf of the purchaser for the option.

The duty then chargeable on the purchase of land will be reduced by the amount of duty (if any) paid by the purchaser for the option (for example,  a fee paid for the grant of the option from the landowner or a fee paid for the transfer of the option from the original option-holder).

Stamp duty on nominations will only apply to options granted after the legislation came into force (23 October 2014). The reduction of duty payable on the land price that is given for any duty paid on the transfer of an option will apply to options granted before the legislation was enacted and exercised afterwards. So a purchaser who paid for a transfer of an option will now enjoy a reduction in the duty payable for the land that would not have been enjoyed prior to this legislation.

For examples of how stamp duty on nominations will work in practice and an explanation of options and their stamp duty treatment generally see our blog post Stamp Duty on Sales of Options over Land.