The State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (Amending Act) received Royal Assent on 19 May 2022.
The changes affecting the New South Wales (NSW) Duties Act became law at the same time.
As detailed in our previous article, the Amending Act makes a number of key changes in relation to stamp duty and land tax among other state taxes.
Subsequently to our article, Revenue NSW has now issued guidelines which we discuss below.
In our view, these new provisions and the proposed administration, based on the guidelines, are extremely complex.
For example, great care will need to be taken when dealing with put and/or call options over NSW dutiable property as duty triggers may arise at multiple points over the life of a transaction (i.e. grant, transfer and exercise of the put and/or call option), and instances of double duty can arise.
Revenue Office guidelines
Revenue NSW has now issued the ‘Legislation Amendment Act 2022 guide’ (Guide) which provides an insight into how it will administer the new provisions.
We set out below an overview of the key stamp duty aspects of the Guide.
Change in beneficial ownership
The most significant change introduced by the Amending Act is the imposition of duty on certain transactions that result in a change in beneficial ownership of dutiable property.
- the creation of dutiable property
- the extinguishment of dutiable property
- a change in equitable interests in dutiable property
- dutiable property becoming the subject of a trust
- dutiable property ceasing to be the subject of a trust.
The Guide states that, as a result of the Amending Act, the following transactions are now dutiable:
- the grant of a put and/or call option
- transfers granting easements
- transfers creating a life tenancy (other than by a will or testamentary instrument).
The Guide lists the statutory excluded transactions under this limb.
In terms of transitional measures, the Guide states the new provisions do not extend to changes in beneficial ownership transactions arising after the commencement date if the transaction occurs in accordance with an agreement or arrangement entered into before the commencement date.
Grant of an option
The Guide states that ad valorem duty will be calculated on the option fee paid for the grant of the option. Not all payments, however, will be dutiable option fees, for example a genuine security deposit should not attract duty under the new provisions.
Premium transfer duty (if applicable) can also apply but not surcharge purchaser duty. When an option is exercised, duty on the option fee is imposed again because the option fee already forms part of the dutiable value where there is a transfer of land that occurs as a consequence of the exercise of an option. The duty paid on the option fee cannot be credited towards the duty payable when the option is exercised.
Further, if a call option is not exercised, the duty paid on the grant of an option will not be refunded.
This scenario is not to be confused with the duty credit available under section 64D of the NSW Duties Act for duty paid on the transfer of an option to purchase land when that option is later exercised.
In addition, these provisions are separate to the complex ‘call option assignment duty’ provisions.
Grant of an easement for consideration
The grant of an easement for consideration will be dutiable on the greater of the consideration and the unencumbered value of the easement.
Grant, renewal or variation of a lease for consideration
The grant, renewal or variation of a lease in land for consideration will be dutiable on the greater of the consideration and the unencumbered value of the lease.
This position is inconsistent with the existing lease provisions which, in the event a premium is paid or payable for the grant, the duty is calculated on the premium (and not by reference to the unencumbered value of the lease).
New forms and lodgement requirements
The Guide lists the various new forms corresponding to the new provisions which in some circumstances replace the existing Purchaser/Transferee Declaration.
In addition, the Guide sets out different lodgement requirements (e.g. eDuties vs EDR) depending on the transaction.
Acknowledgement of trust
The Amending Act creates a new ‘dutiable event’ being an ‘acknowledgement of trust’.
The new provisions aim to tax a ‘statement’ that purports to be a declaration of trust but merely has the effect of acknowledging that identified property vested, or to be vested, in the person making the statement is already held, or to be held, in trust for a person or purpose mentioned in the statement.
The Guide, however, does not provide any further guidance as to what "purports to be declaration of trust".
The Guide states that such acknowledgement will be subject to transfer duty as a declaration of trust and must be submitted to Revenue NSW (e.g. eDuties and not EDR) for assessment.
In terms of the duty calculation, the Guide states:
- the duty is calculated on the dutiable value of the property as at the date of the acknowledgement of trust (i.e. the higher of the GST-inclusive consideration or unencumbered market value of the dutiable property the subject of the trust); and
- an acknowledgement of trust can attract both premium transfer duty and surcharge purchaser duty if the relevant criteria are satisfied.
The changes will take affect for acknowledgments occurring on or after 19 May 2022.
We refer to our earlier alert concerning the further details on provisions of the Amending Act. The Guide does not provide any additional information in respect of these other items.
For example, in respect to refunds for land used for commercial or industrial purposes, the Guide
does not provide any new information. We are still awaiting clarification as to what the word ‘predominantly’ means in this context in addition to other key details.
Revenue NSW has indicated that Ruling G013: Exemption from surcharge for new home development by Australian-based developers that are foreign persons will be updated to provide further detail on the operation of the refund.