Do I Have to Pay Stamp Duty on a Commercial Property?
Thinking of getting a commercial space for your business? Make sure you can afford the tax.
Few people like tax however it is an unavoidable reality. When a business purchases a commercial property they are going to have to pay stamp duty. The considerations to take into account include how much they will have to pay. Likewise, if the property is off the plan or not.
What is a Commercial Property
A commercial property is a business premises. An area that is used for making a profit. That’s why you can have business premises located in residential areas like inns. One of the categories of land is a commercial residential property. There is also the surcharge land tax which provides exemptions for a list of commercial residential properties. This includes properties like hotels, aged care, caravans and more.
Stamp duty is a state based tax that is applied when a property is sold. It also includes the transfer of businesses, insurance and shares. The person who actually buys the property has to pay the tax. The Duties Act 1997 (NSW) details the fine points of what properties are to pay stamp duty. The main provision to be aware of is if s 65 applies to you. That section covers all the different ways in which stamp duty would not apply. However, as a business or an individual when purchasing a commercial property you will usually need to pay stamp duty.
Calculate Stamp Duty
The NSW government has a tool which you can use to check how much stamp duty you will have to pay. You may find that you are purchasing more than one commercial property. Therefore, in that case the properties would be combined into one collective. To calculate the stamp duty you will need the execution date and the purchase price/value of the property.
There are two main ways for purchasing properties off or on the plan. An off the plan property is usually a property which a developer is still constructing or renovating. When the property is off the plan you will have to pay if one of the following occurs:
- They have completed the agreement
- The purchaser’s interest is assigned, whole or part as per the agreement
- 12 months have passed since the agreement
If you are buying on the plan then you have to pay within 3 months after you have exchanged the contract. If you are unsure of what your requirements are around stamp duty you can check with a property lawyer.
Ultimately you should prepare for taxes instead of letting them surprise you. Therefore, take the time to set aside some money and save for stamp duty. Likewise, you can roughly calculate what sort of tax you may have to pay in the future if you buy that particular property.
Have more questions? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
Justin is a legal intern at Lawpath as part of the content team. He is currently studying a Bachelor of Laws and a Bachelor of Economics at UTS.