Purchasing a Queensland business with registered motor vehicles

Queensland is one of a few jurisdictions in Australia which imposes transfer duty in addition to vehicle registration duty when the sale of a business includes registered motor vehicles.

This circumstance can often result in a short-term cash flow problem for the buyer of a business with registered motor vehicles in Queensland, as both transfer duty and vehicle registration duty may need to be paid up front until a credit for the vehicle registration duty is obtained.

This article explains the duty liabilities and how a credit can be obtained for vehicle registration duty paid to the Department of Transport and Main Roads.

Double duty payable in Queensland

There are two types of duty payable in Queensland on the purchase of business assets where those assets include motor vehicles:

1. Transfer duty is payable to the Queensland Revenue Office on an agreement to transfer dutiable property – i.e. the document evidencing the transaction such as the contract of sale; and 
2. Vehicle registration duty is payable to the Department of Transport and Main Roads upon lodging the vehicle registration transfer applications. 

Transfer duty and vehicle registration duty will be for differing amounts as they are assessed by reference to the dutiable value of that property, but the transfer duty liability will generally include an amount representing the motor vehicles being transferred where the purchase price is a fixed sum for all assets. This is where the double duty arises.

Transfer duty.

Transfer duty is calculated by reference to the dutiable value of the transaction which is the greater of: [1]

1. the consideration for the transaction; and 
2. the unencumbered value of the goods/property included in the transaction. 

Vehicle registration duty

Vehicle registration duty is calculated by reference to its dutiable value and the type of the vehicle and drivetrain. [2]

The dutiable value of a vehicle that has been previously registered in Australia (e.g. second hand) is the greater of: [3]

1. the total consideration paid for the vehicle; and
2. the market value of the vehicle. 

In monetary terms, a Volvo bus with a 6-cylinder diesel engine and a dutiable value of $500,000 will attract vehicle registration duty of $17,500 (being 3.5% of the dutiable value),[4] while an electric Mercedes Benz car with a dutiable value of $125,000 will attract vehicle registration duty $5,000 (being 4% of the dutiable value).[5]

Entitlement to reduction of vehicle registration duty 

Where transfer duty is paid or payable on a transaction, a buyer is entitled to seek a reduction of the vehicle registration duty paid on the transfer of registered motor vehicles.

Under section 384(1) of the Duties Act 2001 (Qld), vehicle registration duty must be reduced if:

• an application to register or transfer a vehicle is made in relation to a dutiable transaction;
• the dutiable value of the dutiable transaction relating to the dutiable property includes an amount representing the market value or part of the market value of the vehicle; and
• transfer duty has been paid or is payable on the dutiable transaction.

The following formula is used to calculate the amount of the reduction: DP x MVV / DVDP: 

Critically, the reduction is limited by section 384(3) to being no more than the vehicle registration duty assessed. In other words, you cannot receive a credit or refund greater than the actual vehicle registration duty liability.

In monetary terms, the sale of Queensland business assets totalling $5 million (incurring transfer duty of $268,025) including 8 heavy vehicles with 6-cylinder engines and a total market value of $4 million, will reduce the vehicle registration duty liability of $140,000 to zero.[6]

However, in some circumstances the reduction may only partially reduce the vehicle registration duty liability, meaning that there are still two duties payable.

For example, the sale of Queensland business assets of $500,000 (incurring transfer duty of $15,925) with a fleet of 8-cylinder prime movers with a total market value of $450,000, will only partially reduce the vehicle registration duty liability from $18,000 to $3,667.50, the reduction being $14,332.50.

In this scenario, while the reassessment may not be the same amount as the vehicle registration duty paid, a refund of some of the double duty is better than none.

Conclusion

If you have acquired business assets that include motor vehicles and paid both duties on the purchase of those assets, you are able to seek a reassessment of the vehicle registration duty paid.

The Commissioner of State Revenue has a general power to reassess a taxpayer’s liability at any time up to 5 years after the original notice of reassessment has been given.

McInnes Wilson Lawyers have successfully assisted clients to obtain a reassessment of vehicle registration duty on the purchase of Queensland business assets where transfer duty has been paid.