The State Revenue Legislation Further Amendment Bill 2019 was introduced into the New South Wales (NSW) Parliament on Tuesday 22 October 2019 to amend the legislation relating to duties and land tax.
Under the Bill, anything “fixed to land” will be land for NSW landholder duty purposes. Previously, only common law fixtures were included. Under the new Bill, anything fixed by more than its own weight will be included (e.g. office fit-outs, plant and equipment bolted to the floor etc).
Presently, the registered land tax value is used for freehold land in assessing whether or not an entity exceeds the $2 million land value threshold. However, the Bill removes this concession and the threshold will be based on unencumbered market value. This can be significant as the registered land tax value is the unimproved land value.
The Bill will make it easier for an entity to exceed the $2 million land value threshold for duty to apply, making certain “goods/chattels” to be treated as land. This also lowers the likelihood of obtaining a 90 percent or more goods concession which applies to reduce the duty. The amending bill may impact on a wide range of industries like renewable energy sectors and infrastructure.
Previously, only the acquirer was liable to landholder duty. The Bill makes a landholder (i.e. target entity being acquired), as well as the acquirer, jointly liable for the duty payable.
The Bill also provides for the liability of the target entity to be a charge on the land for which a caveat can be registered. Target entity is entitled to recover as a debt for any duty paid from the acquirer. But if the acquirer cannot fund the duty, then there is a possibility of the charge being enforced or the target entity prevented from selling the land. This will be a key issue for external financiers and due diligence for any future acquisitions or sell down.
The Bill extends stamp duty on call options to include an arrangement for the relinquishment of the call option with an agreement to sell to the third person without the option holder requiring the vendor to sell the land.
The Bill provides an exemption from and refunds of surcharge purchaser duty and surcharge land tax payable in respect of residential land by the trustee of a discretionary trust if the trust prevents a foreign person from being a beneficiary of the trust. This is to prevent a discretionary trust from inadvertently attracting liability for surcharge duty and land tax payable by a foreign trustee.
The Bill will come into effect on the date of Royal Assent and there are transitional provisions generally for agreements entered into before that date. Timing of the existing transactions will therefore be critical.
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