In brief - Act makes changes to duties, land tax and payroll
On Tuesday 14 October 2014, the State Revenue Legislation Further Amendment Bill 2014 (NSW) was passed by the Legislative Council and assented to on 23 October 2014. The State Revenue Legislation Further Amendment Act ("the Act") is part of an ongoing government initiative to respond promptly to protect the state's tax revenues and to ensure that tax liabilities can be clearly identified and operate fairly. In particular, the Act makes amendments to duties, land tax and payroll.
Duties Act 1997 (NSW) amended to prevent avoidance practices
The Act amends the Duties Act 1997 (NSW) in many ways, including:
- to prevent avoidance practices by imposing duty on certain transactions involving options to purchase land;
- to prevent avoidance practices by imposing duty on the novation of an agreement for lease of land; and
- to make further provisions for duty payable on transactions involving self-managed superannuation funds.
The amendments to the Duties Act took effect on 23 October 2014, the date of assent of the State Revenue Legislation Further Amendment Act 2014 (NSW).
Acquisition of options to purchase land to be subject to transfer duty
The Act makes changes to the duty treatment of options to purchase land and ensures that the acquisition of an option by a third party is subject to transfer duty, regardless of the form of the transaction. This means that options to purchase land will be dutiable in the same way as a transfer of an option to purchase land.
The Act provides that a transfer of an option to purchase land is taken to occur if, for valuable consideration:
- another person is nominated to exercise the option; or
- another person is nominated as purchaser or transferee of the land the subject of the option on or before the exercise of the option; or
- the option holder agrees to a novation of the option, or otherwise relinquishes rights under the option so that another person obtains a right to exercise the option or to purchase the land.
Duty to be imposed on change of ownership of option to purchase land
In calculating the consideration for a transfer of land that occurs as a consequence of the exercise of an option to purchase, the Office of State Revenue will take into account the amount or value of the consideration provided by or on behalf of the transferee for the option (whether for its grant, transfer, exercise, relinquishment, novation or otherwise).
Where duty is chargeable on a transfer of land that occurs as a consequence of the exercise of an option to purchase, the amount of duty payable is to be reduced by the amount of duty (if any) paid by the transferee on the transfer of the option to the transferee.
These amendments to the Duties Act are consistent with the policy of imposing duty on the change of ownership of options and will apply to options granted and transferred on or after the commencement date of the provisions.
Duty to be imposed on novation of agreement for lease of land
The Act imposes duty on the novation of an agreement for lease of land as if:
- the lessee's interest in the agreement were dutiable property; and
- the novation of the agreement were a transfer of that dutiable property.
This amendment makes a new lessee liable for duty on the novation of the agreement for lease and is intended to prevent the avoidance of duty by ensuring that duty is payable where a lease is novated, rather than transferred.
Changes affecting self managed superannuation funds
The Act increases the concessional rate of duty that applies from $50 to $500 when a member of a self managed superannuation fund transfers property to the trustee or a custodian of the trustee of the fund.
The Act also imposes duty in the amount of $500 to be payable on a declaration of trust by custodians of self managed superannuation funds holding property on trust for the trustee of a named self managed superannuation fund.
Parties to property related transactions should be aware of changes introduced by Act
The Act makes significant changes to the duty treatment of options to purchase land, novation of agreements for lease of land and the duty payable with respect to property held on trust for the trustee of a self managed superannuation fund.
Parties to property related transactions should take note of such changes to ensure that they are aware of any stamp duty implications they may be liable for, now that the State Revenue Legislation Further Amendment Act 2014 (NSW) has commenced operation.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.