Transfer Duty and loans

In Queensland, transfer duty (Transfer Duty) is governed by the Duties Act 2001 (Qld) (Act).  Pursuant to section 8(2) of the Act, Duty is imposed on the dutiable value of “dutiable transactions” (Dutiable Transactions).

Whether Transfer Duty applies to loans turns on whether or not:

• the creation of a loan is a Dutiable Transaction; or
• loans are considered to be “dutiable property” (Dutiable Property).

What are “Dutiable Transactions”?

Dutiable Transaction is defined in section 9(1) of the Act as (amongst other things):

• a transfer of dutiable property;
• an agreement for the transfer of dutiable property;
• an acquisition of a new right on its creation, grant or issue;
• the creation or termination of a trust of dutiable property; and
• a trust acquisition or trust surrender.

Arguably, a loan is an acquisition of a new right upon its creation.  However, “new right” is defined exhaustively in schedule 6 of the Act, and the definition does not include a right to recover the payment of money.  Consequently, the creation of a loan is not an acquisition of a new right upon its creation and does not attract Transfer Duty under section 9(1) of the Act.

What is “Dutiable Property”?

Dutiable property is defined in section 10 of the Act as:

• land in Queensland;
• a transferable site area;
• an existing right;
• a Queensland business asset;
• a chattel in Queensland; or
• an interest in any of the above, except for a trust interest.

Prima facie, a loan could be a “Queensland business asset” and an “existing right”.

What is a “Queensland business asset”?

Queensland business asset is defined in section 34 of the Act as:

 “a business asset of a Queensland business”.

Business assets are defined in section 35(1) as, amongst other things:

“a debt of a business if the debtor resided in Queensland”.

Hence, a debt owed to a Queensland business may be a Queensland business asset where the debtor resides in Queensland.

What is an “existing right”?

“Existing right” is defined extensively in schedule 6 of the Act, and the definition provided therein does not extend to a loan and consequently, a loan is not an existing right.

Takeaways

Therefore,

• there is Transfer Duty on the transfer of a debt owed to a Queensland business where the debtor resides in Queensland; but
• there is no Transfer Duty on the creation of a new debt in favour of a Queensland business.

Links and further references

Legislation

Duties Act 2001 (Qld)

Further information about Transfer Duty

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Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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