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.  The revenue ruling relating to the Duties Act can be found at: http://www.dtf.wa.gov.au/cms/uploadedFiles/DA_7_0_-_TRANSFER_UNDER_AGENCY_RELATIONSHIP_WHERE_THE_TRANSFEREE_ON_THE_TRANSFER_DIFFERS_FROM_TH.pdf In short, nominee clauses now have the potential to incur the Buyer double 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 duty.

There are provisions under Section 74 of the Stamp Act and Section 42(2) of the Duties Act whereby a Buyer can be substituted by a related person without incurring double duty. You can access the Substituted Purchaser Fact Sheet from this link: http://www.dtf.wa.gov.au/cms/uploadedFiles/SUBSTITUTED_PURCHASERS.pdf

Unfortunately the Substituted Purchaser Form has a number of deficiencies including there being no requirement for the Seller to consent to the substitution of the Buyer which 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 duty. Any progress on this matter will be reported through our Blog and also our email updates.

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