On 22 October 2019, the State Revenue Legislation Further Amendment Bill 2019 (Bill) (currently before the Legislative Assembly) was introduced to Parliament. The Bill proposes to make amendments to the Duties Act 1997, the Land Tax Act 1956 and the Land Tax Management Act 1956 including amendments to landholder duty provisions.
This article outlines the Bill's proposed amendments to the Duties Act 1997 in respect of landholder duty provisions.
Threshold value of landholdings
The current landholder duty regime applies to 'relevant acquisitions' of shares in companies or units in unit trusts which hold interests in land in New South Wales with a 'threshold value' of $2 million or more.1
Under the current legislation, the 'threshold value' is the total value of landholdings in NSW of the company or unit trust as registered by the Valuer-General.2
The Bill proposes to change the method of determining the 'threshold value' of landholdings of a company or unit trust so that the unencumbered value of the land (that is the market value of the property and building) is used instead of the unimproved value (i.e. the registered value) of the land.
This change will result in the value of buildings on the land being included in determining the threshold value of landholdings and the potential application of the landholder duty provisions to entities which would have previously been under the threshold value.
Broadening definition of 'land'
The Bill also proposes to broaden the definition of 'land' for landholder purposes to include anything 'fixed to the land'. Under common law, items that are physically fixed to the land may not necessarily be regarded as fixtures. The new definition of 'land' may include items such as fit-outs and equipment fixed to a building.
Joint liability of landholder
Currently the entity making a 'relevant acquisition' in a landholder is liable for landholder duty, not the landholder entity.3
The Bill proposes to extend the liability for duty payable under the landholder provisions so that the landholder will be jointly and severally liable for the landholder duty payable on the acquisition of an interest in the landholder, together with the entity making the 'relevant acquisition'. Such liability of the landholder will be secured by a charge on the land for which a caveat can be registered.
The landholder entity will be entitled to recover as a debt any amount of landholder duty paid (together with any penalties and interest) from the entity which made the 'relevant acquisition'. As the outstanding landholder duty is a debt which gives the Chief Commissioner an interest in the landholder's property in respect of which a caveat can be lodged, if the entity which made the 'relevant acquisition' in the landholder cannot pay the landholder duty, then landholder entity may be prevented from selling property it owns without first satisfying any outstanding landholder duty payable by an entity which acquired an interest in the landholder.
Surcharge duty and land tax amendments
*The Bill also proposes to make amendments in respect of surcharge purchaser duty and surcharge land tax payable in relation to residential land owned by the trustee of a discretionary trust. These proposed amendments are discussed in our article: Last chance for relief from surcharge duty and land tax for family trusts
1 Duties Act 1997 (NSW) section 146(1) and 149.
2 Duties Act 1997 (NSW) section 146A.
3 Duties Act 1997 (NSW) section 154