Stamp and Cheque Duties Amendment Act 1981

This commentary item was published in Public Information Bulletin Volume 114, August 1981.

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Changes To Stamp Duties Legislation

The Stamp and Cheque Duties Amendment Act 1981 was passed on 9 July 1981 to give effect to the Budget announcement to:

• abolish both the first home and the larger/smaller home exemptions.
• introduce a new reduction in conveyance duty equivalent to an exemption for the first $50,000 on the purchase of an owner/occupied home.
• increase the rate of conveyance duty from a flat rate of 1 percent of the value conveyed, to the following graduated scale:

• increase the rate of deed duty from S1 to $10.
• increase the rate of denoting duty from 40 cents to $1.
• introduce a new duty called credit card transaction duty of 5 cents per transaction entered into by the holders of multi-purpose credit cards.

The main aspects of the provisions are detailed below.

• Abolish the first home and the larger/smaller home exemptions

• (Sections 22A and 22C Stamp and Cheque Duties Act 1971.)

These sections have been repealed from 10 July 1981. However, conveyances executed prior to 10 July in respect of:

• the purchase of a first home,
• the purchase and sale of a home where the sole occupier or those over 45 years of age sell to a growing family, and
• the purchase of the alternative home,

will still be exempt from conveyance duty.

• Reduction in duty for residential properties

• Applies to instruments of conveyances executed on or after 10 July 1981 in respect of:

• transfers of land on which a dwellinghouse is erected,
• transfers of residential land, i.e., land which is acquired for the purpose of having a dwellinghouse erected on it,
• transfers of shares which have the effect of granting a right to occupy a dwellinghouse or unit. Provided that as soon as practicable, after the transfer, the dwellinghouse or residential land is occupied as a residence by:
• the purchaser, or
• the purchaser and a member of his/her immediate family, or
• any member or members of the purchaser's family, or
• a beneficiary or beneficiaries where a trustee purchases a dwellinghouse for the use of that beneficiary or those beneficiaries.

Where the residential land exceeds 4,500 square metres or where the dwelling is used partly for non-residential purposes, the Commissioner may need to apportion the reduction.

Application for the reduction in conveyance duty should be made on form IR673 available from the Department's district offices.

Note: The exemptions in respect of the purchase of a first farm under section 22B of the Act and new dwellings under section 24 continue to apply.

• Increase the rate of conveyance duty
  • The new rates apply in respect of conveyances executed on or after 10 July 1981 which were previously subject to conveyance duty at the fiat rate of 1 percent. Conveyances of shares, mortgages, debentures and mining rights remain subject to conveyance duty of 40 cents per $100 (or part of $100).

• Increase in the rate of deed duty.
  • Applies to deeds executed on or after 10 July 1981.

• Increase in the rate of denoting duty.
  • Applies to counterparts and duplicates executed on or after 10 July 1981.

• Credit Card Transaction Duty.
  • This is a new duty, somewhat akin to cheque duty, imposed on certain transactions involving the use of a credit card and applies to such transactions entered into on or after 10 July 1981.

Transactions which are liable are those entered into in New Zealand (whether by an overseas visitor or a New Zealand resident) in which a credit card is used to:

• purchase goods,
• pay for the supply of services,
• obtain cash,
• pay an account or otherwise receive money's worth,

The important point is that if the card is used in New Zealand for a transaction with a third party, then the transaction is liable to the duty. The use of a card to transact business with the issuer of that card e.g. merely as a form of identification, does not attract duty. Also no duty is payable if the card is used overseas.

If any merchant has issued a card which can be used for credit transactions with other merchants then he should contact his local Inland Revenue Office.

The duty of 5 cents per liable transaction is payable by the agency or merchant issuing the credit card.

Payment is to be made quarterly to the:

District Commissioner, Inland Revenue Department, Private Bag, WELLINGTON.

and is to be accompanied by a statement setting out the number of liable transactions which have been debited to card holders' accounts during the quarter and the number of transactions by overseas visitors for which the New Zealand merchants have been paid. Forms for this purpose are being printed.