Stamp Duty On Business Purchase In New South Wales (NSW)

Transfer duty, or stamp duty, is paid when you purchase property or businesses, with a percentage of the value being paid as stamp duty when your sale is completed. The rules for stamp duty vary depending on your state and territory, with specific rules in New South Wales. Recent changes to transfer duty have seen reductions on the stamp duty you pay when you purchase a business in New South Wales.

We understand how difficult it can be to navigate these new rules, and we are here with a detailed guide that shows you what transfer duty you must pay in New South Wales and what is exempt.

What is transfer (stamp) duty in New South Wales?

Transfer duty in New South Wales is a charge paid when the sale of a business, property, or investment is completed. Typically, the following sales are subject to stamp duty:

• Property
• Investment property
• Vacant land or a farming property
• Commercial or industrial property
• A business and/or its included land

Stamp duty is also applied when you acquire land or an interest in land without buying it, like as a gift or a declaration of trust.

When does transfer duty apply to a business purchase in New South Wales?

In 2016, New South Wales removed transfer duty on the sale of many business assets, reducing or eliminating the cost of stamp duty for many buyers. The following assets have had their transfer duty removed:

• Business licenses and franchises
• Goodwill
• Intellectual property (including patents, trademarks, customer lists, etc.)
• Leases of business premises
• Machinery, stock, and plant and equipment

Essentially, if you buy a business in New South Wales and it does not include land, there is no stamp duty to pay on the purchase price. This abolishing of stamp duty allows prospective business buyers to save hundreds of dollars on their purchases, allowing them to pour the additional money into their new businesses, setting themselves up for success. Compared to other states, like Queensland, buying a business in New South Wales is far cheaper, attracting more business owners to the area.

When does stamp duty apply?

Stamp duty still exists in NSW and must be paid on purchases of businesses if they include:

• Land or an interest in land – businesses that include real estate will have stamp duty applied to the land part of the sale
• Landholder duty – landholder duty can apply if any shares in a company or units in a trust you have own significant land in NSW

Stamp duty will apply to businesses where the business owns the land, and it is included in part of the deal, or you are buying shares in a company or trust that owns land in NSW valued at $12 million or more. The value of the land should be listed clearly in your sale contract, but you can ask your solicitor for more guidance if you are unsure if stamp duty applies to your sale.

How is transfer duty calculated?

Transfer duty is calculated based on the dutiable value of the asset being transferred. In the cases where the business you are buying comes with land, the stamp duty is calculated based on the value of the land rather than the business.

New South Wales transfer duty rates

New South Wales has specific transfer duty rates that will be applied to the sale of any businesses that are eligible for transfer duty. We have listed the dutiable value and their rates for you below:

• Up to $16,000 – $1.25 per $100
• $16,001 to $35,000 – $200 + $1.50 per $100 over $16,000
• $35,001 to $93,000 – $485 + $1.75 per $100 over $35,000
• $93,001 to $351,000 – $1,500 + $3.50 per $100 over $93,000
• $351,000 to $1,168,000 – $10,350 + $4.50 per $100 over $351,000
• Over $1,168,000 – $52,385 + $5.50 per $100 over $1,168,000
• Over $3,000,000 – $163,385 + $7 per $100 over $3,000,000

If you were to buy a business that included a shopfront valued at $500,000, the stamp duty would be $17,805 on the land portion of the purchase.

Landholder duty in NSW

Landholder duty in New South Wales is payable at the same rate as transfer duty in the state. Landholder duty is only payable when you buy shares in a company or units in a trust that owns land in New South Wales. The land needs to be valued at $2 million or more, with the valuation based on the value of the land rather than the business. A solicitor will have more information on the landholder duty and how much you are required to pay for your business shares.

Who is responsible for the payment of transfer duty in New South Wales?

In New South Wales, it is the buyer’s responsibility to pay transfer duty. Unless you have come to an agreement with the seller, the standard practice is that the buyer will absorb the full cost of the transfer duty. The responsibility of transfer duty will be stated in your sale contract, along with the deadline for paying it to ensure that the transaction runs smoothly. Your solicitor can help you with any negotiations for this if transfer duty is payable.

When and how will payment need to be made on transfer duty?

Transfer duty in New South Wales must be paid within three months of signing the contract for the sale or the transfer of the business. While this gives you plenty of time to ensure you have the funds to pay the transfer duty, a settlement cannot take place if the transfer duty is not paid. If a settlement is earlier, you will need to pay the transfer duty on or before the date of the settlement.

The duty must be paid in full and submitted along with the relevant paperwork. A solicitor can help you with this, ensuring that the amount is correct and all the necessary information is submitted.

Exemptions and concessions

Most business purchases in New South Wales do not attract duty due to the 2016 abolition of duty paid on business assets. However, those businesses sold with land and other deductibles will still be required to pay stamp duty. There are some exemptions and reductions that are worth considering, as these could reduce the amount of stamp duty that you pay. We have outlined these reductions below for you. Remember, you should seek legal advice and check that you meet the criteria for these reductions before applying for an exemption or concession.

Small business restructure relief

Some businesses can qualify for a small business restructure relief, which can eliminate or reduce duty. These can be applied if you are transferring from a sole trader to a company you own, allowing you to reduce the costs. You must meet specific criteria to qualify for this as a small business, make sure you check the criteria carefully before sumbitting a concession.

Corporate reconstruction exemptions

When a business reorganises with the same corporate group, it can qualify for a reduction in its stamp duty. Certain internal asset transfers can be exempt from duty, allowing them to lower their bill. Again, we recommend checking the specific criteria for this before applying.

Going concern (GST) vs. stamp duty

Businesses sold as a going concern can confuse some buyers. A business sold as a going concern will typically be exempt from goods and service tax (GST), but it will not be exempt from stamp duty. You will need to pay stamp duty when you purchase a business if the land is involved in New South Wales.

How to structure a business purchase in NSW to minimise duty

Stamp duty no longer applies to most business purchases in NSW, so you will want to structure deals that focus on reducing income tax, capital gains tax, and GST. However, if you are purchasing a business that comes with land, we recommend the following tips to help minimise duty on your purchase:

• Consider a lease instead of buying land to avoid stamp duty
• Consider buying assets instead of shares when the business has over $2 million of NSW land to avoid landholder duty charges
• Use small business restructure exemptions to claim duty exemptions

Not all of these tips will apply to every business purchase with land, but it is worth seeking some legal advice to see if you are able to lower the stamp duty you need to pay.

Get more information on buying & selling a business from an experienced business broker across Australia

With the abolishment of stamp duty on most business assets, purchasing a business in NSW can be a cheaper and more strategic option. However, businesses with land can leave you with a large stamp duty bill. Use our tips today to reduce them, and speak to a business broker to see what businesses in NSW are on sale and waiting for you.

We have experienced business brokers across Australia, and you can get in touch with them by following the details below:

• Get in touch with business brokers on the Gold Coast
• Get in touch with business brokers in Brisbane
• Get in touch with business brokers in Perth
• Get in touch with business brokers in Sydney
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