State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW)

In late May 2022, the NSW Government introduced significant changes to the duty regime. Importantly, the changes capture transactions and statements that are currently not caught, extend the operation of anti-avoidance provisions and introduce a refund for surcharge duty and land tax for Australian developers where residential land is purchased for commercial or industrial purposes.

The expansion of the duty regime is somewhat surprising, particularly in light of the Government's recent proposal to move away from the imposition of duty in favour of a broad based property tax.


From 19 May 2022, the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW) (Amendment Act) introduced substantial changes to the Duties Act 1997 (NSW) (Duties Act) by:

  • broadening the existing duty coverage by imposing duty on acknowledgements of existing trusts and changes in beneficial ownership;
  • enabling refunds of surcharge purchaser duty payable by certain foreign persons if the transferee uses the land, wholly or predominantly, for commercial or industrial purposes;
  • expanding the scope of the exemption for certain transfers of primary production land between members of the same family, to include transfers to companies and trusts that are controlled by a member of the family; and
  • updating the anti-avoidance provisions to apply it to all state taxes (instead of only duty) and introducing penalties for promoters of tax avoidance schemes.

The Amendment Act describes its objectives as making 'miscellaneous amendments to legislation relating to State revenue and fines'. Despite this innocent description, these changes significantly expand the scope and the administration of state taxes in NSW.

Changes in beneficial ownership

A key amendment is the imposition of duty on certain transactions that result in a change in beneficial ownership of dutiable property. This includes:

  • the creation of dutiable property (including for example the granting of an option over dutiable property);
  • extinguishment of dutiable property;
  • a change in equitable interests in dutiable property;
  • dutiable property becoming the subject of a trust; or
  • dutiable property ceasing to be the subject of a trust.

These provisions are a significant change to the coverage of duty in NSW, as it moves from a tax on transfers of property to one on the creation, extinguishment or transfer of property. As a consequence, many previously non-dutiable transactions may now be dutiable.

Following the introduction of the changes, Revenue NSW published a Guide to the Amendment Act on the Revenue NSW website as a reference for taxpayers and professionals to access information relating to the amendments, and how they affect duties transactions.

Duty will be calculated on the higher of the consideration for, or the unencumbered value of, the dutiable transaction. In the context of the grant of a call option or a put and call option, this will mean duty will be payable on the higher of the option fee (together with any other monetary or non-monetary consideration) paid for the grant of option or the value of the call option (which will generally be the difference between the exercise price payable under the option and the market value of the land). The option fee (consideration) includes GST (if applicable), but does not include genuine security deposits, performance payments and legal costs.

However, duty paid on the option fee will not be credited towards the duty payable when the option is exercised. If the call option is not exercised, a refund of duty will not be issued for duty paid on the grant of option.

Acknowledgements of existing trusts

Another important change is the imposition of duty on the making of a statement that:

  • purports to be a declaration of trust over dutiable property, but
  • merely has the effect of acknowledging that identified property vested, or to be vested, in the person making the statement is already held, or to be held, in trust for a person or purpose mentioned in the statement.

The amendment is in response to (and are intended to reverse the effect of) the recent judgment of the Court of Appeal in Benidorm,1 which reduced the scope of the declaration of trust charging provisions. The Court of Appeal in that case held that the definition of 'declaration of trust' in section 8(3) of the Duties Act does not encompass mere acknowledgements of existing trusts. That is, a mere acknowledgment of an existing position that alters nothing could not be a dutiable 'transaction'.

The Guide does not provide any guidance on when a document will 'purport to be a declaration of trust over dutiable property' but it is clear that it can apply to words in a document relating to identified property not yet acquired by the trustee (such as a contract to acquire property).

However, declaration of trust is defined in the Duties Act to mean any declaration (other than by a will or testamentary instrument) that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, or the purpose or purposes, mentioned in the declaration although the beneficial owner of the property, or the person entitled to appoint the property, may not have joined in or assented to the declaration.

Therefore, so long as the document in which the purported declaration is contained simply refers to the capacity of the trustee by reference to the name of the trust and makes no reference to the persons or purposes for which the trust property will be held, the document should not be considered to be 'purporting to be a declaration of trust over dutiable property'. That said, given the broad drafting of the new rules and the failure of the NSW Government to provide appropriate guidance, care should be taken whenever referencing an existing trust in transaction documents.

If this new rule does apply, duty is calculated on the dutiable value of the property of the trust as at the date of the acknowledgment of trust and both premium transfer duty and surcharge purchaser duty may apply.

Refunds for surcharge purchaser duty

Surcharge purchaser duty at a rate of 8% is payable on dutiable transactions relating to acquisitions and certain dealings in residential related property by a foreign person (in addition to the general rate of duty).

The amendments now enable surcharge purchaser duty paid in relation to a transfer of land to be refunded if, after the transfer, the land is used by the transferee wholly or predominantly for commercial or industrial purposes.

Extension of primary production exemption

A transfer duty exemption applies to certain transfers of primary production land between certain members of a family. Previously, it was only possible to claim this exemption where the transferee was an individual.

Under the new changes, the duty exemption may also be available where the transferee is:

  • an executor of a deceased estate;
  • a proprietary limited company;
  • a trustee of a:
    • bare trust;
    • self-managed superannuation fund;
    • discretionary trust; or
    • private unit trust scheme.

In the case of these broader entities, the family member must, instead of being the transferee, be the person directing the transferee.

The new changes also introduce a post association requirement. Where the transferee is a proprietary limited company, or a trustee of a discretionary trust or of a private unit trust scheme, the family member directing the transferee must also maintain the person's minimum 25% interest in the transferee for three years after the transfer for the exemption to apply.

Anti-avoidance regime and promoter penalties

The rules in relation to State tax avoidance schemes will now be administered under Part 10A of the Taxation Administration Act 1996 (NSW) (Tax Admin Act).

The Tax Admin Act re-enacts, in a modified form, the provisions of the duty avoidance provision in the Duties Act which deter schemes to avoid duty. The amendment extends the duty anti-avoidance provisions to schemes for the avoidance of all kinds of tax liability, rather than only a liability to pay duty.

The changes also introduce penalties to deter the promotion of tax avoidance schemes. The new division targets conduct that results in a person being a 'promoter', being a person who 'markets the scheme or otherwise encourages the growth of the scheme or interest in it'. However, it will not include a person who 'provides advice about the scheme or distributes information or material about the scheme prepared by another person'.

Key Takeaways

Importantly, in light of these changes there are now a large number of transactions in relation to dutiable property that were not previously dutiable.

In particular, those working in property transactions must be aware of these recent changes, as a number of the usual approaches and standard transaction structures such as the use of options are now captured by the duty regime.


1 Chief Commissioner of State Revenue v Benidorm Pty Ltd (2020) 104 NSWLR 232.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.