Have you ever thought about buying two or more properties in one complex?
With ownership of property being one of the most prominent investment methods, it can be appealing to buy multiple properties to invest in. Maybe you have thought about buying two or more properties in the same unit complex. Be careful about buying multiple properties as you may be caught in having to pay increased transfer duty, known as aggregate transfer duty.
What is Aggregate Transfer Duty?
With all purchases of residential property, transfer duty is payable to the Queensland Revenue Office unless an exemption applies. Aggregate Transfer Duty arises when there is a purchase of more than one property and the purchases can be linked in a way that it should be taxed as one agreement to purchase the properties. This is most common when the same buyer is involved in purchasing multiple properties.
Purchasing more than one property will not automatically give rise to aggregate transfer duty, as the essential factor of aggregation is if the purchases are linked in some way.
The Queensland Duties Act 2001 sets out relevant factors in determining whether multiple purchases are linked, which includes:
- whether the buyer and seller are the same in each contract, or are related;
- if the purchase of multiple properties are put into 1 contract;
- whether each property has their own contract, but at least one contract is conditional upon settlement of one of the other contracts;
- the dates that the contracts were entered into (the contracts can be signed months apart but still be considered 1 arrangement if they contain similar features);
- whether the seller used the multiple properties together or dependent on each other;
- whether the buyer will use the multiple properties together or dependent on each other (a common example would be where the purchaser purchases multiple neighbouring properties for the purpose of redevelopment).
In short, if the contracts have a similar feature such as:
- same parties;
- neighbouring location – especially in a unit complex; or
- an intention to use the properties for a common purpose,
then the transactions will be considered one arrangement and will be aggregated.
The Disadvantage of Aggregate Transfer Duty?
Do not be fooled into thinking that it is a benefit to make purchases that would result in aggregate transfer duty. You may initially think that by aggregating the contract purchase prices together you would pay less transfer duty, but it is actually the opposite.
Transfer duty increases on a progressive scale, and this means:
the higher the consideration amount, the more you pay in transfer duty.
Therefore, aggregating purchases will result in paying an increased amount of transfer duty rather than the lower values payable on each separate transaction.
Failing to pay transfer duty on the aggregated amount will cause serious consequences:
1. having to pay the recoverable amount on unpaid transfer duty
2. having to pay the penalty interest.
If you are looking to purchase more than 1 property, always consult with a lawyer to confirm whether the transactions may be aggregated, or risk paying penalty interest.
The key takeaway for buyer’s is if you are looking to purchase more than 1 property, be careful of what you are purchasing. It is not necessary for the purchases to occur at the same time, but if the purchases share a common feature, it is most likely the transactions will be aggregated for tax purposes. If transfer duty is aggregated you will be required to pay a higher amount to the Queensland Revenue Office.
If you have any questions or require assistance with transfer duty or a conveyancing matter in Queensland, please contact the property team at My Property Protect for more information.
Kayleigh Swift, Associate
Chloe Skubis, Graduate Law Clerk
About the authors
Kayleigh Swift is an associate in our Commercial and Property team who assists with Employment Law matters. With a high level of experience in commercial and retail leasing, voluntary and involuntary purchase and sale acquisitions, property development and employee relations, Kayleigh provides practical advice to ensure smooth business transactions.
Chloe Skubis is a Graduate Law Clerk in our Property team who assists with various conveyancing transactions. Chloe is very experienced in residential conveyancing and is a problem solver. She always provides efficient service to all her clients.