Government fees and duty changes

With the new financial year commencing, the duty and registration regimes in different states is changing significantly.

THe following is a summary only. For any specific queries, please contact your local Network Law member firm.

Duty

It is important to note that almost all the duty changes relate to conditional exemptions, rather than wholesale changes to rates. Therefore, Lenders should not change the disclosure of Mortgage Duty or Credit Business Duty as a result of the changes.

The exception is Victoria. Following the abolition of Mortgage Duty in Victoria, Lenders should no longer disclose Mortgage Duty for Victoria.

Registration Fees

In relation to changes of registration fees, Lenders should start disclosing the higher fees immediately.

Queensland

Queensland is introducing duty changes in two tranches.

For purchase contracts and mortgages signed on or after 1 May 2004, where the purchase price is less than $500,000.00, first home buyers will pay no Mortgage Duty or Transfer Duty on the first $250,000. Transfer Duty will apply at a lower rate up to $500,000.00.

For purchase contracts signed on or after 1 August 2004, the concessional rate of Transfer Duty that currently applies to all home purchases (purchase of a Principal Place of Residence) for the first $250,000.00 will be extended to the first $300,000.00.

More information on Queensland's changes

Registration fees at the Queensland Titles Office will also increase (in line with inflation). The standard dealing will now cost $105.60. For Transfers and more complicated dealings, refer to the Titles Office's new online calculator

New South Wales

While Mortgage Duty remains untouched in New South Wales, there are new concessions for First Home Buyers. The "First Home Plus" scheme has been extended so that first home purchases of less than $500,000.00 will be duty free, with discounts for purchases up to $600,000.00. Lower threshholds apply for vacant blocks.

The new concessions for First Home Buyers are offset by a new "exit tax" for property investors. Where the value of an investment property has increased by more than 12%, the vendor will pay "Vendor Duty" of up to 2.25% of the purchase price. Although the vendor is responsible for paying the duty, all purchasers and Lenders must ensure that each and every Contract and Transfer are noted for Vendor Duty (even if the notation states "Not liable to Vendor Duty").

Registration fees at the New South Wales LPI will increase markedly in New South Wales on 1 July 2004. A standard dealing will now incur a $75.00 fee.

Further details of the duty changes

Victoria

The biggest change relates to Victoria, where Mortgage Duty has been abolished entirely. Any mortgage that is signed and settled on or after 1 July 2004 will not be subject to Mortgage Duty (on a $300,000.00 loan, that will save the borrower $1200.00).

Any mortgage that is signed before 1 July 2004, but settles on or after 1 July 2004, will incur nominal duty of $4.00.

Victoria has also started paying First Home Owners an additional grant known as the "First Home Bonus" of $5,000.00. The First Home Bonus is available to people over 18 years of age who enter into a contract to purchase or build a home, or build a home as an owner-builder, between 1 May 2004 and 30 June 2005 and where the consideration paid under the contract is no more than $500,000. With the First Home Bonus and First Home Owner's Grant (FHOG) combined, many Victorian first home buyers will be entitled to $12,000.00 in government assistance.

The Victorian State Revenue Office will also be implementing a number of other initiatives announced in the May budget , such as increasing conveyance duty compliance measures and introducing exemptions for concession card holders.

Western Australia

The general rate of conveyance duty (for all purchasers in WA) will be cut by 5%, while the threshold for the concessional rate has been increased to $200,000 (up from $135,000), with further discounts for First Home Buyers up to $300,000. For more information

South Australia

South Australians eligible for the First Home Owner's Grant (FHOG) will no longer pay any Mortgage Duty, while first home purchasers can now claim $250,000.00 for a partial duty concession (up from $130,000.00). more information.

South Australians will pay a higher common lodgement fee ($98.00) at the Titles Office, with a more complicated arrangement for new (higher) transfer fees. Details

Australian Capital Territory

The Territory's income based exemption will be widened, extending transfer duty exemptions to higher income thresholds. Also, the common lodgement fee will increase to $82.00 (up from $80.00).

Further information on the ACT Duty changes. The Titles Office website.

Tasmania

First Home purchasers in Tasmania will benefit from a new duty concession of up to $4 000 on purchases of less than $350 000. Further details

Future Changes: Multijurisdiction mortgages

Queensland Parliament is currently considering a Bill to amend the Duties Act 2001 which has an impact on multijurisdictional mortgages that have a Queensland and Victorian component.

As soon as this Act commences, Queensland will exclude Victoria from the calculation of the dutiable proportion. In practice this means that Queensland will collect duty as though 100% of the property is located in Queensland (even if much of it is, in reality, located in Victoria).

There are no parliamentary sittings until 13 July 2004, and given that the Estimates Hearings run from 13 -23 July, it's not clear when the Bill will be proclaimed or commence. So in the meantime, the Queensland side of Victoria/Qld Multijurisdictional mortgages will function as usual.

Lenders and Mortgage Managers should continue to disclose duty in Loan Contracts as though 100% of the property is located in Queensland (ie they should give no discount for multijurisdictional mortgages). This is standard practice in all states for most Lenders anyway, and will protect you against Credit Code breaches once the legislation commences.

While all states currently exclude the ACT and Northern Territory from multijurisdictional calculations, at this stage Qld is the only state that is extending the exclusion to Victoria. Further details .

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Tax Office begins low doc loan audits

The Tax Office has begun auditing a number of people where income disclosed to lenders of low doc loans is substantially higher than that disclosed in their tax returns.

Tax Commissioner Michael Carmody said that in the cases under examination it is difficult to see how the loans could be serviced by the incomes disclosed in tax returns. In some cases the annual loan repayments themselves exceed reported taxable incomes. In other cases, people with substantial loans had failed to lodge tax returns.

"These are potentially serious breaches of the law. People deliberately understating their income face penalties of up to 75 per cent plus interest," Mr Carmody said.

Low doc loans do not require paperwork to prove income. The lending institution usually charges a higher rate of interest on these loans.

The Tax Office has been matching details from a selected range of low doc loans with the borrowers' tax files.

More

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New Privacy Case Notes for Credit Providers

The Privacy Commissioner has released notes on 3 cases relating to credit providers.

In O v Credit Provider [2004] PrivCmrA 5 the Commissioner declined to investigate because the respondent had not had an adequate opportunity to deal with the complaint.

The complainant had devoted significant time and resources towards developing a business venture. A finance institution refused his application to finance the venture due to an overdue account (default) listed on his consumer credit file.

The complainant had no knowledge of the default and immediately notified the credit provider of the listing. The credit provider removed the default listing three weeks later.

Several months after the credit provider removed the payment default the complainant wrote to the Commissioner alleging that the credit provider had improperly listed the default and that he had suffered significant financial loss as a result and was seeking compensation on this basis. According to the complainant, he had paid the debt owed to the credit provider and was at no time sixty days in arrears. He alleged that the credit provider experienced a computer error and consequently listed the default.

Although the complainant had contacted the respondent and asked that it remove the default, the documents the complainant provided suggested that the respondent was not aware that the complainant was seeking compensation.

In R v Credit Provider [2004] PrivCmrA 7 the Commissioner declined to investigate because the complaint was made almost four years after the event and it was likely that key people would no longer be able to recollect the events that had occurred.

The complainant alleged that a credit provider listed an overdue account (a default) on her consumer credit file despite the fact that it had said that it would cease collection activity. The complainant claimed that the improperly listed default, which had been placed on her file almost four years earlier, had prevented her from obtaining credit and purchasing a home. The complainant sought compensation for financial loss she had suffered as a result the alleged breach of the Act.

In U v Major Banking Institution [2004] PrivCmrA 9, the Commissioner declined to investigate the case because the respondent had adequately dealt with the matter.

A default notice regarding the complainant's overdue private bank account was disclosed by the respondent to the complainant's spouse, from whom she was separated. The complainant brought her concerns to the respondent's attention. The respondent wrote to the complainant stating that the error was caused by out-of-date information being held on its database, and that it was at the time, unaware of the complainant's changed circumstances. The respondent apologised for the incident.The complainant was not happy with the outcome and wrote to this Office seeking compensation.

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Queensland Budget details

The Queensland Treasurer has released details of the State's 2004-05 Budget.

Amongst other things, from 1 August 2004, credit card duty will be abolished and the general insurance duty rate will be reduced from 8.5% to 7.5%. In addition, debits tax will be abolished from 1 July 2005.

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Soft dollar commissions

ASIC has released a research report on soft dollar benefits in the financial planning industry. The research explores the types of benefits that are offered to financial planning firms and how they are disclosed to clients.

'If advisers accept benefits with the potential to influence their advice, the law requires they clearly disclose these conflicts of interest to clients', said Mr Greg Tanzer, ASIC's Executive Director of Consumer Protection and International.

'Consumers need to know if their adviser is in a position to give impartial advice as this may affect their decision about whether to act on the advice', said Mr Tanzer.

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Financial System Guarantee Report

The Commonwealth Government has released the results of a technical study to consider the merits of introducing an explicit guarantee of part or parts of the Australian financial system and the merits of possible coverage and design options.

Professor Kevin Davis, Professor of Finance, University of Melbourne lead the technical study.

The Government is seeking public comment.

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Information Security Survey

Deloittes have released their 2004 Global Security Survey for financial institutions.

The goal of the survey is to help participants assess their state of security as against their counterparts.

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