Structuring a loan transaction correctly is important to avoid unnecessary stamp duty.
In one case where a couple decided to purchase a commercial property for $2 million, the vendor agreed to lend them $1 million to assist with the purchase. The $1 million loan was secured by a first registered mortgage over the property, repayable in five years’ time, incurring stamp duty of almost $4,000.
But if the contract had referred to the payment of the purchase price of $2 million via instalments, and the draft mortgage had been annexed to the contract to secure the balance of the purchase price owing after settlement, stamp duty of only $5 would have been payable. The reason is that there would have been no ‘amount secured’ as defined by the law, as no ‘advances’ made by the vendor to the couple.
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