With effect from 1 July 2016, the NSW State Government has abolished stamp duty on mortgages, being the last Australian state to do so. However, this isn’t just a dry change in taxes; it is an opportunity for anybody in the business of granting credit.

Taking security over a debtor’s property has always been recognised as one of the simplest ways to protect against the debtor’s insolvency.  However, until its abolition, mortgage duty applied to most agreements to take security over security assets located in New South Wales.

This meant that, while some creditors would, for example, include clauses in their credit agreements or guarantees taking security over a debtor’s assets, if the creditor ever wanted to enforce that security they would have to have to pay stamp duty in arrears (often including penalty interest), and then run the risk that even after those expenses the security could prove worthless.

Now, however, with the abolition of stamp duty across Australia, this cost and complexity is drastically reduced, and it is open to creditors of all kinds (whether lenders, suppliers, or service providers) to include terms in their loan agreements, credit agreements, and guarantees providing for the taking of security over their debtor’s assets, without incurring any liability to pay duty. 

By taking such security, creditors can potentially drastically improve their position in a debtor’s insolvency.  However, creditors should still obtain legal advice to ensure that:

  1. Their agreements are properly drafted so that any security taken is enforceable
  2. Any necessary registrations of that security (for example, on the personal property securities register) are lodged

To discuss how you or your business can make use of this opportunity, contact Dajana Malnersic on 02 9234 1500.