Nominee/Agency Information

As you would be aware in October 2007 the Office of State Revenue (?OSR?) introduced Revenue Ruling SD 36.0 which related to the issue of nominee clauses and agency relationships. A copy of this ruling can be obtained at: http://www.dtf.wa.gov.au/cms/osr_content.asp?id=1824.

In short, nominee clauses now have the potential to incur the Buyer double stamp duty.

The change in procedure places the responsibility back on Buyers to ensure they seek advice prior to entering into a Contract to determine which entity should be buying the property. Buyers must, at the time they enter into a Contract of Sale, know exactly who the Buyer will be. If at a later time they wish to change the Buyer they may incur additional stamp duty.

There are provisions under Section 74 whereby a Buyer can be substituted by a related person without incurring double stamp duty. You can access the Substituted Purchaser Fact Sheet from this link: http://www.dtf.wa.gov.au/cms/uploadedFiles/SUBSTITUTED_PURCHASERS.pdf however whilst I am aware of the history behind this form and its ability to resolve some stamp duty issues in the conveyancing profession I remain concerned regarding the deficiencies in the form.

The form does not require the consent of the Seller to the substitution of the Buyer and this is in direct conflict with the Joint Form of General Conditions Clause 26.5(a) (2) which states ?The Seller and Buyer must not assign or transfer the Contract or any right under the Contract to a third party without the prior written consent of the other?.

As the Seller is not a party to the Substituted Buyer Form there is no ?contract? between the Seller and the substituted Buyer and should the substituted Buyer default on the Contract the Seller only has recourse against the original Buyer, not the substituted Buyer.

From the substituted Buyer?s perspective, the deposit monies and all rights and remedies under the Contract remain with the original Buyer and do not transfer to the substituted Buyer.

I hope to soon recommence communication with OSR on these deficiencies in an attempt to create a document which resolves the issues the OSR form has created. Unfortunately previous proposals put to OSR run the risk of incurring double stamp duty and nobody wants that. Any progress on this matter will be reported through our Latest News pages.

In the meantime, please click here to read the advice we have obtained by Mony De Kerloy on the nominee/agency relationship.