The release of the 2023-24 budget by NSW Treasurer Daniel Mookhey on September 19, 2023, marked a significant turning point in the fiscal landscape of the state projected to yield a substantial increase in revenue, estimated at nearly $1 billion over the next four years.
In this article we focus on the noteworthy changes in state tax policies and regulations from a property perspective. With that focus in mind, the key modifications introduced under the Treasury and Revenue Legislation Amendment Bill 2023 (NSW) include:
Land Tax (Principal Place of Residence): Starting from the 2026 land tax year, eligibility for the principal place of residence exemption from land tax will now require all occupants who use the land as their principal place of residence to collectively own at least a 25% interest in the land.
Private Unit Trust Schemes: Subject to certain timing, exceptions and transitional provisions, the existing duty exemption for acquiring less than 50% interest in a unit trust scheme holding land valued at $2 million or more will be lowered to a 20% threshold. This change is consistent with Victoria's treatment of private trusts, marking a substantial reversionary shift in the management of unit trusts in NSW.
Wholesale Unit Trust Registration: Subject to satisfaction of specified criteria, some unit trusts will be able to register as wholesale unit trusts, restoring the 50% threshold for duty imposition. This is a concession to wholesale unit investors. The criteria broadly centres on the nature of the proposed investors.
Relief for Corporate Reconstruction / Consolidation: The previous total exemption from duty for corporate reconstruction or consolidation transactions will be replaced with a 90% concession.
Linked Entity (Tracing) Rules: The proposed reduction of the threshold for applying linked entities rules from 50% to 20% may, with some group corporate arrangements, have an unexpected significant impact, potentially making some entities landholders when previously they were not. A review of existing structures may be necessary in addition to the need to be aware for future transactions.
Increase in Nominal Duty: The nominal duty that applies to counterparts, ancillary documents and similar ($10 to $20) and certain declarations of trust (over non-dutiable or unidentified property) ($500 to $750) will increase effective from February 1, 2024.
Remission of Interest: Currently, interest on late payment of duty may be charged at market rate specified and at a premium rate (8%) often depending on whether a voluntary declaration has been made by the taxpayer. A new regime for the remission of interest is proposed, empowering the Chief Commissioner to issue guidelines for interest remission, with the effect imposition of interest may be less challengeable.
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.