A Guide to the Law of Securitisation in Australia - Clayton Utz

4.4 Transfers of mortgages and other assetsMost securitisations involve a transfer of property from anoriginator to a special purpose vehicle. Depending on the natureof the property to be transferred and the stamp duty legislationapplicable to that transfer, ad valorem transfer or conveyanceduty may be payable in respect of the transfer.In New South Wales, under the Duties Act, transfers ofmortgages, debts and other choses in action are not dutiable dueto the relatively narrow dutiable property definition in section 11and the exemption for mortgagees’ interests in dutiable propertyin section 65(1)(d) (see above).In undertaking the stamp duty structuring of a securitisation, it isimportant to assess whether the New South Wales Duties Act isthe only applicable stamp duties legislation.If it is, traditional drafting techniques involving the use of aClaytons contract for the transfer of financial assets may not berequired. If however, the transfer transaction is one which wouldhave a territorial connection to Western Australia or SouthAustralia, such techniques would still be appropriate.4.5 Charge over propertyMost structures involve a charge over the securitised assets assecurity for the issuer’s obligations under the debt instrumentsissued to investors. The charge may be liable for mortgage dutyin New South Wales under Chapter 7 of the Duties Act. All theother States have a similar head of duty.The duty payable is approximately 0.4 percent of the amountsecured (ie. on the face value of debt instruments outstanding),which can constitute a substantial cost to be borne by an issuer.It is not uncommon for issuers to seek to take advantage of theabsence of mortgage or loan security duty in the AustralianCapital Territory and to execute the security in that jurisdiction orin any other jurisdiction other than South Australia or WesternAustralia at a time when its only secured assets are located inthe Australian Capital Territory. This then raises the issue ofwhether there are any applicable clawback provisions whichcatch the security at a date following execution. The answer tothis depends on the legislation of the relevant jurisdictions inwhich the subsequently charged property is located.Section 208(3) of the NSW Duties Act contains an afteracquired land provision which levies duty on securities over landacquired within 12 months of execution of the security. Similarprovisions appear in the Duties Acts of Tasmania, Queenslandand Western Australia.Extra care needs to be exercised in relation to the Queenslandand Western Australia provisions because of their other limb,which catches securities for after-acquired property which isspecifically identified, whether or not in the instrument, at thetime the instrument is first signed.All these comments regarding mortgage duty represent theposition which applies were it not for the relief offered formortgage backed (and certain other) securitisations under theDuties Acts in New South Wales, Tasmania and Queensland. Nosuch relief is available in South Australia or Western Australia.Naturally, the abolition of mortgage duty in Victoria has alsoprovided relief.4.6 Issue of securities to investorsUnder the 1920 Act there was a concern that the land richprovisions in Division 30 could apply to the issue of equitymortgage-backed securities, since mortgages at law involveinterests in land. Under the Duties Act, however, section 163C(1)excludes the estate or interest of a mortgagee or chargee whenidentifying an entity’s land holdings so that there is no possibilityof the land rich provisions in chapter 4A applying to equitymortgage-backed securities.As debenture duty has been abolished, the creation or issue ofdebentures and other debt securities does not attract duty.4.7 Transfer of securities between investors and thesecondary marketThe transfer of a unit in a private unit trust is subject tomarketable securities duty of 0.6 percent if the register is kept inNew South Wales or, if there is no register in Australia, themanager (or if there is no manager, the trustee) of the trust isincorporated or resident in New South Wales. A transfer of aunit on a New South Wales register can also attract a liability inother States. Accordingly, the law of other States needs to beconsidered.As discussed previously, debt securities are not dutiable propertyand so they can be transferred without liability for New SouthWales duty.25