Transfer Duty on Option Fees

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Recent changes to the Duties Act 1997 introduced duty on certain transactions, including the granting of a put and/or call option.

When does duty on the grant of a put and/or call option in NSW need to be paid?

All option transactions (whether they are a call and/or put option) entered into on or after 20 May 2022 will attract transfer duty (formally referred to as stamp duty). This means that the grantee of an option (typically a property developer) will be liable to pay transfer duty.

The amount of duty will be calculated on the option fee paid for the grant of the option (in the same way that duty is calculated on the transfer of a property).

For example, if:

  • a call option deed is entered into between an owner of a property and a property developer; and
  • the option agreement requires the property developer to pay the owner an option fee of $100,000,

the property developer will need to pay transfer duty on the amount of the $100,000 option fee.

Note: A minimum duty of $10.00 will apply regardless of the amount of the option fee payable under the option agreement.

Are there any exceptions to paying duty?

Duty will not be payable on the following costs paid in connection with the granting of a put and/or call option:

  • security deposits;
  • performance plans; and
  • legal costs paid.

Therefore, option agreements or deeds will need to be prepared so that an owner of a property receives security deposits and/or performance plan payments rather than option fees.

Is duty paid on an option fee credited towards duty payable when the option is exercised?

Although an option fee is generally credited towards the purchase price of a property subject to an option, duty paid on an option fee cannot be credited towards duty payable on the transfer of the property.

Is duty paid on an option fee refunded if the option is not exercised?

Although duty paid on a contract entered into for the purchase of property is refundable if settlement under the contract does not occur, duty paid on an option fee is not refundable if an option is not exercised.

New Declaration for the Grant of a Put Option and/or Call Option

Revenue NSW now requires a declaration for the Grant of Put Option and/or Call Option (Form ODA 081) to be completed for all option transactions first entered into on or after 20 May 2022.

The declaration will need to be completed by the grantee in order for duty to be assessed on the option.

Importantly, the declaration requires the grantee to confirm whether the grantee under the option is a trustee of a trust.

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How we can help

  • Advise you on whether transfer duty is payable in respect to an option deed that you enter into on or after 20 May 2022
  • Set up and advise you on the most tax effective structures for carrying out your developments
  • Advise you on your transfer duty obligations on private or commercial transaction (including new structures, joint ventures, mergers and demergers)
  • Prepare a tailored suite of transactional documents (including heads of agreement or term sheets, options deeds and special conditions to contracts) that allow you and your team to secure a site quicker