We recently advised on the NSW Government’s proposed changes to the Duties Act. As foreshadowed in that advice, the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (Act) (i.e. the enabling legislation in respect of those changes) has now received assent and is in force as of 19 May 2022.
In summary, the effect of these legislative changes is to increase the range of transactions where stamp duty may be payable. For example, duty will now be imposed when granting an option to purchase property, either outright or via a lease. Granting options are very common in property transactions and we see these changes as having the potential to significantly increase costs associated with acquiring property. People should also now exercise caution when signing any document or making any statement that could potentially be construed as being a declaration or an acknowledgement of trust, as this may also attract duty.
While the grant, renewal or variation of a lease for no consideration is not dutiable, you should be aware that duty may be imposed where a fee (such as lease premium) is payable in exchange for that grant.
Changes in beneficial ownership
Revenue NSW has released a guide which clarifies the scope of the Act and summarises which “changes in beneficial ownership” the Act is intended to capture. In particular, the guide stipulates that duty will now be payable on the grant of a put and/or call option, transfers granting easements, and transfers creating a life tenancy (other than by a will or testamentary instrument).
With respect to put and/or call options, ad valorem (which means full) duty will be calculated on the option fee paid for the grant of an option. This duty will not be credited towards the duty payable on the Contract for Sale or transfer when the option is exercised. The duty paid on a put and/or call option is not refundable if the option is not exercised.
When will the changes take effect?
The amendments will affect transactions entered into on or after 19 May 2022. They will not apply to ‘change in beneficial ownership’ transactions that arise after this date if the transaction occurs in accordance with an agreement or arrangement entered into before 19 May 2022.
What should you do?
Given the Act is now in effect, you should exercise caution when entering into any transaction which potentially gives rise to a change in beneficial ownership and give careful consideration to the scenarios that we have indicated above. If you need assistance navigating this developing area of law or in assessing whether a proposed transaction will give rise to a stamp duty liability, please don’t hesitate to contact our property and commercial team on (02) 4927 2900. It is wise to get practical advice on these transactions before you enter into them, as the resulting stamp duty liability can be large.
