Three taxpayers have been successful before NSW Court of Appeal in a matter concerning additional mortgage duty.

In an earlier decision, the NSW Supreme Court had in part upheld a decision of the Commissioner that additional mortgage duty was payable by the taxpayers on a deed of variation under which the time for payment by them of the purchase price for certain loan notes was extended. The Supreme Court held that mortgage duty was payable on the deed of variation but held the Commissioner had erred in including capitalised interest in the sum on which mortgage duty was assessed. Accordingly, the Supreme Court had remitted the matter to the Commissioner for reassessment in accordance with its decision.

Before the Court of Appeal, the taxpayers contended the primary judge had erred in concluding that additional mortgage duty was payable, in essence because, even if the extension of time for payment of the purchase price amounted to a “forbearance”, it was one that did not involve the provision or obtaining of funds to or by the taxpayers and hence was not an “advance” within the meaning of the relevant mortgage duty provisions.

In a cross-appeal, the Commissioner argued the primary judge had erred in concluding that capitalised interest should not have been included in the calculation of additional mortgage duty.

In unanimous decision, the Court of Appeal held the primary judge had erred in holding that the 2009 deed of variation was liable to additional mortgage duty as an advance within the definition in s 206(a)(iii) of the Duties Act 1997 (NSW). It also dismissed the Commissioner’s cross-appeal.

(Note that mortgage duty has been abolished since 1 July 2012.)

(Bondi Beachside Pty Ltd & Ors v Chief Comr of State Revenue [2014] NSWCA 6, NSW Court of Appeal, Bathurst CJ, Ward JA, Tobias AJA, 7 February 2014.)

[LTN 26, 10/2/14]