7 July 2022
by David Prichard and Georgia Bell
- Related topics
- Personal Tax
A number of amendments have been made to the NSW Duties Act and Land Tax Act which will have significant ripple effects. The changes may impact how commercial deals are structured as well as whether individuals have a Land Tax surcharge liability on their home. So, what has changed?
Under the former Duties Act, duty was chargeable on certain transactions of dutiable property (think the sale of land), however, the changes enacted in May now mean that duty can be levied on a transaction that “results in a change in beneficial ownership of dutiable property”. In other words, the scope of transactions on which duty is payable has expanded and importantly, there does not need to be a change in ownership for duty to be payable.
Under the new law, the following will be dutiable:
- the granting of an option over dutiable property with the grant fee being dutiable;
- the transfer of options with duty on the purchase price plus the nomination novation fee;
- the transfer of put and call options over dutiable assets with duty implications arising for the nominator and the nominate.
In addition to the above, the changes impact the acknowledgement of a trust. Historically this was not subject to duty, however, duty is now imposed on the making of a statement that purports to be a declaration of trust over dutiable property. The person making the statement will be liable for duty, at the time the statement is made. This means that care must be taken when drafting documents to ensure no unintended duty on liability arises.
Changes have been enacted in relation to the principal place of residence (PPR) exemption for permanent residents. The rules have been tightened such that to obtain the PPR exemption an individual must “use and occupy” the residence as their PPR for a continuous period of 200 days in the land tax year. The amendments now require that permanent residents be physically in Australia for the 200 days (except in limited circumstances).
Permanent residents should take care to ensure that they meet the requirements. One should note that revenue authorities have access to data from the Department of Immigration and are matching this to ownership records to determine whether the 200-day test is met.
If you have any questions regarding these changes and how it may affect your tax position, please reach out to your ESV Engagement Partner.