Significant tax changes in NSW – do you need to act now?
The Treasury and Revenue Legislation Amendment Bill 2023 (the Bill) passed both Houses of Parliament in NSW on 21 September 2023. Once assent is received, the Treasury and Revenue Legislation Amendment Act 2023 (Amendment Act) makes a number of significant changes to the Duties Act 1997 (NSW) (Duties Act).
An update on the proposed changes is outlined below.
Corporate reconstruction and consolidation transactions – no longer a full exemption
Currently, under the Duties Act, there is an exemption available for all duty payable in respect of a corporate reconstruction or consolidation transaction (being transactions relating to the restructure of assets or ownership of entities within a corporate group).[1]
However, as a result of these new changes, the exemption will be replaced with a concession – meaning that duty will still be imposed on such transactions, although at a concessional rate of 10% of the duty that would otherwise be payable.[2]
The new regime will apply to transactions that occur on or after 1 February 2024. However, transitional provisions provide a limited exception in certain circumstances – specifically, a full exemption for transactions occurring on or after 1 February 2024 will still be available if:
- the transaction arose from an agreement or arrangement entered into before 19 September 2023; [3] and
- an application for the exemption is lodged on or before 1 April 2024.
Landholder duty changes – a new ‘significant interest’ acquisition threshold for private unit trusts
Landholder duty is payable on the acquisition of a ‘significant interest’ in a landholder in New South Wales (being an entity with landholdings which exceed $2 million).
Previously, a person acquired or held a significant interest in a landholder for the purposes of the Duties Act if the person is entitled to a specified percentage of the property of the relevant entity – being 50% or more for a private landholder (private company and private unit trust) and 90% or more for a public landholder (listed companies and trusts and widely held trusts).[4]
The amendments introduce a new landholder duty threshold for private landholders that are private unit trusts – reducing the significant interest threshold from 50% to 20%.[5] Effectively, private unit trusts will no longer be treated as private companies for landholder duty purposes in New South Wales.
The 50% threshold will only continue to apply to ‘wholesale unit trusts’ or imminent wholesale unit trusts that are registered with Revenue NSW. Wholesale unit trust is a new concept introduced into the Duties Act by the amending legislation and includes, amongst other things, that the majority of units in the fund be held by qualified investors (e.g. superannuation funds with at least 300 members).
Landholder duty changes – new threshold for ‘linked entities’
The new legislation also reduces the threshold for the tracing of property through ‘linked entities’ of a landholder. Currently, a landholder is required to include the value of landholdings held by ‘linked entities’ in the landholdings of the landholder for the purposes of calculating duty only if the landholding entity holds a 50% or more interest in the linked entity.
This threshold will be reduced to 20% once the changes take effect.[6]
The landholder duty changes broadly align the regime in New South Wales with the position in Victoria in relation to linked entities and private unit trusts.
Like the corporate reconstruction exemption changes, the changes to the landholder duty provisions will apply to acquisitions that are completed on or after 1 February 2024 unless they arose from an agreement or arrangement entered before the amending legislation was introduced to Parliament.[7]
Increase in fixed and nominal duty amounts
The fixed or nominal duty currently charged in respect of various transactions throughout the Duties Act will increase with effect from 1 February 2024. In this regard, duty:
- payable on the declaration of trusts over unidentified and non-dutiable property will increase from $500 to $750; [8]
- payable upon the stamping of subsequent instruments for dutiable transactions effected by more than one instrument, and on transfers of property in consequence of a change of trustee, will be increased from $50 to $100;
- transfers and instruments relating to managed investment schemes will be increased from $50 to $500;[9] and
- payable on the stamping of duplicates and counterparts is increased to $20 (currently $10).[10]
Land tax – principal place of residence changes
The legislation also implements changes to the availability of the land tax exemption for principal places of residence.
Effectively, there will no longer be an ability to claim the principal place of residence exemption from land tax unless all of the persons who occupy the land as their principal place of residence own at least a 25% interest in the land.
Entitlement to the land tax exemption will continue to be available until 31 December 2025, even if the interests of the persons occupying land is less than 25%, providing those affected owners with time to restructure their ownership to ensure continued availability of the exemption, if required.
End to the duty exemption for certain zero and low emission vehicles
Finally, the new legislation puts an end to the availability of an exemption from motor vehicle registration duty for zero and low emission vehicles from 1 January 2024.[11]
Transitional provisions will allow battery electric vehicles and hydrogen fuel cell electric vehicles that were purchased (or for which a deposit was paid) before 1 January 2024 but were not yet registered by that date to continue to access the exemption.[12]
Footnotes
[1] Duties Act 1997 (NSW) ss 273A-273F (‘Duties Act’).
[2] Treasury and Revenue Legislation Amendment Bill 2023 (NSW) sch 1 para 14 (‘Amendment Bill’’).
[3] Amendment Bill sch 1 para 19.
[4] Duties Act s 150(2).
[5] Amendment Bill sch 1 para 6.
[6] Amendment Bill sch 1 para 9.
[7] Ibid para 19.
[8] Ibid para 4.
[9] Ibid para 3.
[10] Ibid para 2.
[11] Ibid para 11.
[12] Ibid para 19.
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.
