The NSW Government has recently passed the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022, which has substantially increased the range of transactions and dealings that are subject to duty in NSW. This includes charging duty on transactions taken to be a change in beneficial ownership of dutiable property and mere acknowledgments of existing trusts holding dutiable property. Both changes come less than 18 months after the NSW Government announced plans to phase out stamp duty in favour of a broad-based property tax.Daniel Hui & Tristram Feder, Maddocks Lawyers
The NSW Parliament recently passed the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW) (Amending Act) in May 2022, amending the Duties Act 1997 (NSW) (Act). Among other things, the Amending Act has significantly broadened the stamp duty base by charging duty on:
These changes take effect from 19 May 2022.
Section 8(1)(b) of the Act lists several types of transactions that are dutiable, such as the sale of dutiable property. The Amending Act creates new subsection 8(1)(b)(ix) which now imposes duty on a change in beneficial ownership of dutiable property.
The Minister indicated in his second reading speech that the Amending Act’s purpose is to charge stamp duty on structuring arrangements which are intended to be dutiable but were not previously captured. He gave the following example:
‘a fixed trust holding land … has two beneficiaries, each with an equal interest and one of these beneficiaries disposes of their 50 per cent interest to the other beneficiary. There is no change in the legal ownership of the land … but the remaining beneficiary has now acquired an additional 50 per cent beneficial interest in the land, without any duty being incurred. This is obviously contrary to the intentions of the Act.’
This new catch-all provision is designed to charge stamp duty on a wider range of transactions and dealings with dutiable property, including:
For example, Revenue NSW has provided guidance that the following transactions are now subject to duty:
There is a list of excluded transactions which mostly exclude transactions involving unit trusts or transactions for no consideration.
These provisions only apply to transactions that occur after commencement, being 19 May 2022.
Section 8AA(1) has been inserted by the Amending Act, charging duty on the making of a statement that:
Section 8AA(2) makes it clear that the making of this statement is taken to be a declaration of trust and is a dutiable transaction, despite the statement not actually constituting a declaration of trust, i.e. merely acknowledging an existing state of affairs.
This reform is in response to the NSW Supreme Court decision in Chief Commissioner of State Revenue v Benidorm Pty Ltd  NSWCA 285. That case involved two purported declarations of trust. The first declaration involved Benidorm Pty Ltd declaring that it held a Sydney penthouse on trust for the beneficiary. After the beneficiary’s death, his last will and testament appointed the penthouse be held on trust for a new beneficiary, and Benidorm ‘declared’ that it held the same property on trust for the new beneficiary on the same terms as the first declaration. The Supreme Court of NSW held that the second ‘declaration’ was not dutiable under the Act as it did not constitute a ‘declaration of trust’ as it merely acknowledged the existing legal position whereby the interest of the deceased beneficiary had already vested in the new beneficiary.
As a result of new section 8AA, trustees should be cautious in executing documents that contain wording capable of being construed as a declaration of trust when the trust is already duly constituted, as this may trigger additional duty.
Two views can be taken as to how section 8AA may operate:
Revenue NSW has issued some limited guidance on the operation of section 8AA. However, further more detailed guidance is needed to provide insight into how broadly section 8AA is intended to apply, and trustees should be cautious and obtain advice prior to entering into any documents that could be construed as a purported declaration of trust as it could result in duty applying to an arrangement that has already previously been assessed.
Some additional amendments contained in the Amending Act include:
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Revenue Practice Group.
You can read earlier ClearLaw articles on a range of matters.
Melissa is a lawyer in the Maddocks Commercial team.
Melissa has been involved in acting for a range of commercial and professional industry clients.
Melissa advises extensively in the following areas:
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.