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Borrowers who remember paying stamp duty on a mortgage years ago sometimes expect it on a caveat loan. It no longer exists.
Mortgage duty is gone everywhere
Mortgage duty, sometimes called loan security duty, was a state tax on the amount secured by a mortgage or charge. The states abolished it progressively: Victoria in 2004, Queensland and Western Australia in 2008, South Australia in 2009, and New South Wales, the last, in 2016. Tasmania, the ACT and the Northern Territory do not charge it either. A caveat, an unregistered mortgage and a registered mortgage are all free of duty today.
Transfer duty, the tax paid when property is bought, is a different thing and is unaffected. If the loan is funding a purchase, transfer duty is payable on the purchase in the usual way.
Registry fees
Each land registry charges a fee to lodge a dealing:
- to lodge the caveat at the start;
- to lodge a priority notice, where one is used;
- to lodge the withdrawal of caveat at the end.
If the security is a registered mortgage, a fee applies to register it and another to discharge it. Electronic lodgement network operators also charge a small transaction fee. All of these are set by regulation and move each financial year, which is why a fixed figure is not quoted here.
Where the real costs are
Government charges are the smallest line on a caveat loan. The costs that matter are interest, the establishment fee and legal fees, set out in caveat loan fees. On a $300,000 loan, registry fees are a fraction of one percent of the total cost.
Tax treatment
Borrowing costs for a business-purpose loan, including establishment, legal and registry fees, are generally deductible, often spread over the life of the loan or five years, whichever is shorter. Interest on business borrowing is generally deductible as incurred. Your accountant should confirm how that applies to your structure. See is private loan interest tax deductible.
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Get matched with a funderFAQ
How much is the fee to lodge a caveat?
It differs by state and changes each July, but it is generally in the low hundreds of dollars. The same order of fee applies to the withdrawal. The lender's solicitor will quote the current figure.
Who pays the registry fees?
The borrower, under almost every loan agreement. They are usually deducted from the advance at settlement and included in the payout figure at the end.
Is GST charged on a caveat loan?
Interest and most loan fees are financial supplies and are not subject to GST. Legal and valuation fees generally include GST.