Stamp Duty - Stamp duty aspects of dealings with intellectual property

by Peter Allen

Introduction

The purpose of this article is to cover basic stamp duty issues that arise when you deal with intellectual property.

We deal with the most traditional forms of intellectual property, such as patents, copyright and trade marks, although the definitions of intellectual property in the relevant legislation are wider than these types of intellectual property. The amount of stamp duty payable will depend on the terms of the relevant transaction and instrument.

These comments are directed only to the grant of a licence of intellectual property, a transfer of intellectual property and an option to acquire intellectual property. Other dealings, such as a mortgage of intellectual property, will raise different issues.

Overview

Stamp duties in Australia have undergone great change. The previous view was that certain items of intellectual property were creatures of Commonwealth legislation and therefore were situated throughout Australia, rather than in any particular State or Territory. This gave rise to problems for the various State revenue authorities in attempting to tax dealings with such Commonwealth intellectual property.

A number of the jurisdictions, led by the Northern Territory, have introduced a concept of 'dutiable property'. This extends to certain types of intellectual property. Specified dealings with dutiable property are dutiable transactions.

South Australia and Western Australia still maintain the traditional treatment, namely seeking duty on conveyances of property. Western Australia, however, has announced significant changes to its Stamp Act. One of these is to broaden the conveyance duty base in that State by including intellectual property transferred in conjunction with a business. This change is anticipated to be in place by the end of 2003.

Grant of licence of intellectual property

A grant of a licence of intellectual property should not be liable to duty in New South Wales, Victoria, Tasmania and the ACT, provided the licence is not within the definition of franchise arrangement.

A grant of a licence should not be dutiable in Queensland, provided the grant is not a 'new right'.

In Western Australia and South Australia, conveyance includes vesting. You must ensure that the licence granted to use the IP is a mere personal right rather than a proprietary right. This is not a straightforward issue and will be determined by the extent of the rights granted by the licence.

If the intellectual property in question is a creature of Commonwealth statute, then it should be possible to structure the transaction so that there is no connection with either State, although South Australia has some additional hurdles.

If intellectual property is owned by a company taken to be registered in South Australia by the Corporations Act, or a resident of that State, then intellectual property is deemed to be situated in South Australia.

In South Australia, if the intellectual property is a business asset, then it is deemed to be situated in South Australia to the extent that the business is carried on there. Apportionment rules are contained in the South Australian Act.

A grant of a licence may also be liable to mortgage duty in Western Australia, if the licence contains obligations to pay periodic licence fees. The Western Australian Government has foreshadowed that this taxing event will be removed from the Western Australian Stamp Act. Again, this is anticipated by the end of 2003.

The grant of a licence of intellectual property can be liable to conveyance duty in the Northern Territory if it is in connection with a business undertaking. The grant of an interest in a patent, registered design or copyright can be dutiable, even without a business.

Transfer of intellectual property

Transfers of intellectual property bring more risks of stamp duty, particularly if they are dealt with in a business transaction.

In New South Wales, ACT and Tasmania, a transfer of intellectual property can be liable to duty if:

  • intellectual property has been used or exploited in the relevant jurisdiction in the past 12 months; and


  • the intellectual property is transferred in connection with a disposal of a business situated in the relevant jurisdiction.


  • No duty is payable in Victoria on the transfer of intellectual property.

    In Queensland, a transfer of intellectual property is liable to duty if the intellectual property is a Queensland business asset. To be such an asset, the intellectual property (which is widely defined) must be used for carrying on a current or former business that is conducted from Queensland or that involves supplies to Queensland customers. If the intellectual property is a Queensland business asset, it will only be dutiable if it is transferred along with another different type of Queensland business asset.

    It is also necessary to be satisfied that the intellectual property in question does not constitute an 'existing right', which is another species of dutiable property in Queensland.

    Conveyance duty is payable in the Northern Territory on the transfer of a right to use in the Northern Territory certain types of intellectual property used in connection with a business undertaking situated in that Territory. An outright transfer of a patent, registered design or copyright is also liable to conveyance duty.

    For transfers of intellectual property in Western Australia and South Australia, see the previous discussion on grants of a licence to use intellectual property. The same position applies, bearing in mind the changes announced in Western Australia.

    Option to acquire intellectual property

    An option to acquire intellectual property should receive the same stamp duty treatment as a transfer of the same type of intellectual property, except in New South Wales, Victoria and the ACT. In these jurisdictions, an option to acquire intellectual property should not be dutiable.

    Conclusion

    Licences of intellectual property for Australia and the transfers of intellectual property require examination of the stamp duty legislation in each State and Territory of Australia. There is no uniform treatment of the issue between the jurisdictions.

    While most types of grants of licence should not be liable to duty, the risks of conveyance duty increase where the relevant dealing is a transfer of intellectual property or where the grant or transfer is in connection with a business undertaking.

    This is a general note only. Specialised advice should be taken on your specific circumstances.


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