Property Update December: Stamp Duty Reform

The typical Sydney buyer forks out $42,000 stamp duty per transaction
NSW residents currently pay $7 billion annually in stamp duty taxes
Tax reform will cost the state about $185 million annually in taxes-It’s a small step towards reform
Average savings will be circa $500 per transaction
NSW will be the first state to index stamp duty annually to CPI
It’s been recommended that a stamp duty replacement tax be phased in to replace the duty. This tax would be payable annually rather than a one-off hefty payment when properties transact.

Commercial Tenant Advocacy Services

How our experience helps businesses re-negotiate a new lease or locating new premises.

Leasing Explained
What you need to know and things that need to be considered to get the best outcome

Rent
Take the example of premises leased at $100,000 per annum, does the rent include everything? If it includes all the running costs of the building (outgoings) then it is considered to be a ‘gross rent’ If there is a separate charge for the outgoings, then it is a ‘net rent’.

Assume the premises are 200m2 then the rent of $100,000 per annum could be defined as $500m2 p.a. gross or $500m2 p.a. net

In today’s market, many landlords will offer incentives to the tenant to enter into a lease. The rent figure written in the lease document is referred to as the ‘face rent’. The term ‘effective rent’ is the rent figure arrived at after reducing the face rent to take account of the value of any incentive provided to the tenant.

These terms are linked to provide a ‘short hand’ description of rental, i.e. $500m2 gross face, 500m2 gross effective, $500m2 net face or $500m2 net effective.

Incentives
Landlords are anxious to preserve their market rents, fill vacancies and to retain their tenants whose leases have expired. In either case, they may offer incentives which usually take one of two forms;

Fit-out Contribution
Rent free Period
Combined incentive
Rent abatement

The amount of incentive can vary between 10% and 20% of the aggregate value (all the years added) of the lease.

A simple illustration would be – initial rent $200,000 per annum (gross) for a 5-year lease is $1,000,000 aggregate value. An incentive of 15% therefore equates to $150,000 to be taken as a fit-out contribution or a rent-free period. $200,000 p.a = $16,666 per month, therefore $150,000 = 9 months’ rent free.

In practise, the calculation of incentives can prove complex as rent reviews over the lease and the time value of money are taken into consideration.

Other things to consider are lease terms and options.