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

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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
264.8 Relief for mortgage-backed securities in New SouthWalesSome time ago, New South Wales attempted to sponsor thegrowth of the mortgage-backed securities market by removingstamp duty on the issue and transfer of qualifying “mortgagebackedsecurities” and on the underlying transactions required tocreate such securities. The exemptions were repeated in aslightly different form in the Duties Act.Under section 282(3) there is no duty chargeable under theDuties Act in respect of:“(a) the issue or making of a mortgage-backed security, or(b) the transfer or assignment, of or other dealing with amortgage-backed security, or(c) the discharge, cancellation or termination of a mortgagebackedsecurity.”Given the Duties Act’s relatively narrow tax base, many of thesetransactions would not have attracted duty anyway. The transferof equity securities is perhaps the only exception.Relief from duty is also given in respect of:• a charge over a collateralised mortgage pool securing theissuer’s obligations for mortgage-backed debt securities(section 282(1));• a charge over a collateralised mortgage pool which is given inconnection with creating, issuing, marketing or securing amortgage-backed security (section 282(2);• a charge over a collateralised mortgage pool given for thepurpose of creating, issuing, marketing or securing amortgage-backed security to or by certain persons (section282(4)); and• any instrument that in the opinion of the Chief Commissionerwas executed for the purpose of creating, issuing ormarketing mortgage-backed securities (section 283).The concessions relate only to a mortgage-backed security. Thisterm is defined in the Duties Act:“(a) an interest in a trust that entitles the holder of or beneficialowner under the interest:(i) to the whole or any part of the rights or entitlements of amortgagee and any other rights or entitlements in respectof a mortgage or any money payable by the mortgagorunder the mortgage (whether the money is payable to theholder of or beneficial owner under the interest on the sameterms and conditions as under the mortgage or not), or(ii) to the whole or any part of the rights or entitlements of amortgagee and any other rights or entitlements in respectof a pool of mortgages or any money payable bymortgagors under those mortgages (whether the moneyis payable to the holder of or beneficial owner under theinterest on the same terms and conditions as under themortgages or not), or(iii) to payments that are derived substantially or, if theregulations prescribe the extent, to the prescribed extent,from the income or receipts of a pool of mortgages, andthat may, in addition, entitle the holder or beneficialowner to a transfer or assignment of the mortgage ormortgages, or(b) a debt security (whether or not in writing) the paymentsunder which by the person who issues or makes the debtsecurity are derived substantially or, if the regulationsprescribe the extent, to the prescribed extent, from theincome or receipts of a pool of mortgages, or(c) any of the following:(i) an interest in a trust creating, conferring or comprising aright or interest (whether described as a unit, bond orotherwise) of or on a beneficiary in a scheme underwhich any profit or income in which the beneficiariesparticipate arises from the acquisition, holding,management or disposal of prescribed property, or anyinstrument that evidences such a right or interest;(ii) a security (whether or not in writing) the payments underwhich by the person who issues or makes the security arederived substantially from the income or receipts ofprescribed property;(iii) an interest in a trust, a debt security (whether or not inwriting), an instrument or property that creates aninterest in or charge over an interest in a trust, a debtsecurity (whether or not in writing) or other instrument orproperty, to which paragraph (a) or (b) or subparagraph (i)or (ii) of this paragraph applies, but does not include aninstrument or property comprising; or(d) a mortgage; or(e) the transfer of a mortgage; or(f) a declaration of trust; or(g) an instrument of a class or description of instruments, orproperty of a class or description of property, prescribed notto be a mortgage-backed security for the purposes of thisdefinition.”
Page 6: 12.7.3 Euroentitlements............
Page 9 and 10: 1 General overview of the nature of
Page 12: An interest in a managed investment
Page 15 and 16: 142.3.4 Provision of a financial se
Page 17 and 18: 3 The disclosure and civil liabilit
Page 19 and 20: 18The statutory source for this ste
Page 21 and 22: The implication of this approach in
Page 23 and 24: Interestingly, the majority then we
Page 25: 4 Stamp duty and securitisation244.
Page 29 and 30: 4.10 ConclusionStamp duty is a very
Page 31 and 32: Despite the absence of an express a
Page 33 and 34: 32share of the profits of the compa
Page 35 and 36: (d) before the issue:(i) the compan
Page 37 and 38: 365.4 Debt/equity rulesDivision 974
Page 39 and 40: Entities that make GST-free supplie
Page 41 and 42: • “ enterprise” is defined in
Page 43 and 44: 6 The Consumer Credit Code andsecur
Page 45 and 46: 7 The regulation of the participati
Page 47 and 48: inclusion within the ELE depends on
Page 49 and 50: 8 Set-off and securitisation8.1 Int
Page 51 and 52: 50However, this result and the prin
Page 53 and 54: 9 Insolvency and securitisation529.
Page 55 and 56: 54• if the trustee has not limite
Page 57 and 58: Section 588FG provides a measure of
Page 59 and 60: 10 Issues relating to debt securiti
Page 61 and 62: 60indemnity existed) and had no han
Page 63 and 64: The effect of the decision has been
Page 65 and 66: the ASX has discretion to ask the e
Page 67 and 68: • Public Trustee Members - for pr
Page 69 and 70: When Austraclear receives notificat
Page 71 and 72: have been completed in relation to
Page 73 and 74: Some CMBS transactions allow the is
Page 75 and 76: 14.3 GamingIn the past, another con
Page 77 and 78:
16 Clayton UtzOur securitisation te
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A Guide to the Law of Securitisation in Australia - Clayton Utz

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