Stamp duty on new leases was abolished in New South Wales in 2008. However, there are still circumstances where a tenant, must pay stamp duty under a commercial or retail lease.
Creation of lease
You must pay stamp duty on a new lease only when you pay the landlord upfront a lump sum to encourage him/her to grant the lease.
Retail leases
Key money payments (including premium payments) are not permitted for retail leases. If you are a retail tenant, it’s unlikely that you will have to pay stamp duty on the registration of a retail lease.
Premium payment vs up-front rent
There is a difference between premium payments and rent up-front or in lump sum instalments.
The payment must be considered a capital payment. In general, if you pay a sum simply to gain access to the right to lease it is likely to be considered a premium. Payments made to gain the use of the premises is viewed as ordinary rent on which no duty is payable.
Exempt leases
Some leases are exempt from stamp duty even if a premium is payable. These include leases:
- of units in a retirement village;
- for approved nursing homes; or
- of premises to the Home Care Service of NSW
Transfer of lease
You must pay stamp duty on the transfer or assignment of a lease. The amount will depend on whether you are paying any money specifically for the transfer.
Even if you are not paying any money for the transfer, you must still pay Revenue NSW a nominal amount each time you transfer your lease. Land Registry Services is unlikely to accept a transfer without the nominal stamp duty having been paid.
As the assignment or transfer of a lease often occurs in conjunction with the sale of a business, other dutiable amounts may also be payable (e.g. if the sale of business includes a transfer of lease and goods, then nominal stamp duty will be payable on the Sale of Business Agreement, for the duplicate Sale of Business Agreement, and for the Transfer of Lease).
Surrender of lease
The surrender of a lease (where you voluntarily give up the lease to the landlord before your lease term has expired) is also subject to stamp duty. The amount of duty depends on the circumstances of the surrender. If the landlord requires you to surrender the premises and pays you an amount as compensation, then this amount is subject to duty. On the other hand, if you voluntarily surrender the lease, then you are liable for only nominal duty.
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