Tax Update

Instant asset write off scheme extended

In our April Tax Radar edition we provided a break down of the instant asset write-off scheme (which you can find here).  In summary, the scheme enables businesses with an aggregated annual turnover of less than $500m to access instant asset write-offs in respect of assets worth less than $150,000.

The instant asset write off scheme has now been extended until 31 December 2020, a welcome initiative in circumstances where many businesses are commencing operation after a COVID-induced hiatus and may only now be in a position to determine what assets they require to see them through post pandemic.

The accelerated depeciation deduction scheme (also described in our April Tax Radar edition) is also available until 30 June 2021.

Legislation passed – exclusion of foreign beneficiaries of discretionary trusts in NSW

The State Revenue Further Amendment Bill 2020 (NSW) has now passed, and received Royal Assent on 24 June 2020.  Advisors will recall that the bill proposed changes to the land tax and duty regimes in New South Wales, with respect to the imposition of surcharge purchaser duty and surcharge land tax on discretionary trusts with foreign beneficiaries.

A discretionary trust is taken, under new section 104JA of the Duties Act 1997 (NSW), to be a foreign trustee (and liable to surcharge on residential land owned by the trustee) if the terms of the trust do not prevent a foreign person from being a beneficiary.

In effect, this means that all discretionary trusts that own residential land in New South Wales should consider whether the deed should be amended to exclude foreign residents as beneficiaries of the trust (and be prepared on the basis that the terms of the trust cannot be amended so as to allow a potential beneficiary who is a foreign person to become a beneficiary of the trust).

Under the transitional rules, trustees will have until 31 December 2020 to make irrevocable amendments to their deeds to exclude foreign residents as potential beneficiaries of the trust.

Changes to landholder duty regime in New South Wales

The State Revenue Further Amendment Bill 2020 (NSW) also makes important changes to the landholder duty regime in New South Wales.  In particular, from the date of Royal Assent:

• the method of determining whether a company or private unit trust is a landholder is now determined having regard to the unencumbered value of a landholder’s land (previously, an entity was only a landholder in NSW if the unimproved value of land exceeded the $2m threshold); and
• for the purposes of calculating duty on an entity’s landholdings, those landholdings will include not only fixtures, but all items fixed to the land (whether owned by the landholder or not).

‘Goods’ are still excluded from forming part of the landholder’s ‘land’ for duty purposes in New South Wales, however presumably goods will now fall within the regime to the extent that they are fixed to land.

Whilst the changes align the New South Wales landholder regime to one which is similar in operation to that of other States, they also have the effect of significantly expanding the landholder duty base in New South Wales.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.