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Part 2: Duty payable on options – and other important duty changes

Malcolm Campbell, ||

This is the second in a series of blogs on the topic of recent changes to the Duties Act 1997 (NSW) (the Act) – and, of course, what this means for you, and how we can help.

This blog covers the changes to acknowledgment of trust, off the plan transactions, and the breakup of marriages and de facto relationships.

Acknowledgment of trust

Section 8AA of the Act

The amendments to the Act also introduce the new section 8AA.  This amendment charges duty on the making of a statement that has the effect of acknowledging that identified property that is 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.

This amendment is in response to the decision of the Supreme Court of NSW in Benidorm Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 471.  In that case, the Court narrowed the scope of the declaration of trust charging provisions.  Her Honour, Ward CJ in Eq, held that the definition of “declaration of trust” in sub-section 8(3) of the Act does not encompass mere acknowledgments of existing trusts.  In other words, the declaration must have a legal consequence, or consequences, beyond that of merely acknowledging that which already exists.

Prior to the decision in Benidorm, any declaration of trust was considered dutiable, provided that it met the definition in sub-section 8(3) of the Act, and none of the relevant concessions applied.

Does the transaction attract premium transfer duty?

As above, premium transfer duty will be payable if the acknowledgment relates to residential property with a value greater than the relevant premium duty threshold (such threshold being $3,000,00.00 for the 2021/22 year).

Does the transaction attract surcharge purchaser duty?

Surcharge purchaser duty will be payable if the trustee of the trust is a foreign person and the dutiable property is residential-related property (see, in this connection, Chapter 2A of the Act and Revenue Ruling G009 – Definition of a Foreign Person).

What are the evidentiary and identification requirements?

There are new evidentiary requirements for s 8AA.  There are updated forms that must be used for transactions entered into on or after 19 May 2022.  Those include:

  1. Purchaser/Transferee Declaration form for individual (ODA 076 I);
  2. Purchaser/Transferee Declaration: non-individuals(ODA 076 NI); and
  3. Statement for Dutiable Transaction not Effected by a Written Instrument (OSD 046) (if applicable).

Note that, where a transaction is affected by a written instrument, a copy of the instrument must be provided when lodging the application for assessment.

How are these transactions processed?

This transaction must be lodged via eDuties.

Off the plan transactions

Section 49A of the Act

To qualify for a 12-month deferral on payment of duty for off the plan purchases, all purchaser(s) and/or transferee(s) must meet the residence requirement.  In other words, at least one of the purchaser(s) and/or transferee(s) must use and occupy the property as their principal place of residence for a period of at least 6 months, within 12 months of the completion of the sale or transfer.

For transactions entered into on or after 19 May 2022, the Act will exempt defence force personnel from the residence requirement where at last 1 of the purchasers and/or transferees is a member of the Permanent Forces of the Australian Defence Force, and each of the purchaser(s) and/or transferee(s) is enrolled to vote in State elections under the Electoral Act 2017 (Cth).

What are the evidentiary and identification requirements?

There have been some changes to the evidentiary requirements (see s 49A).  There have been minor changes to the Purchaser/Transferee Declaration form for an individual (ODA 076 I).  Part 6 specifically relates to off the plan purchasers and provides for the nomination of active ADF personnel.

Breakup of marriages and de facto relationships

Section 68 of the Act

For an exemption from duty due to the breakup of a relationship, s 68 of the Act stipulates that the transfer or agreement is effected by a binding financial agreement, court order, or purchase at a public auction, where the property was relationship property immediately before the auction.

For transactions entered into on or after 19 May 2022, s 68 will include transfers or agreements effected by an agreement made for the purpose of dividing relationship property as a consequence of the breakdown of the relationship.

What are the evidentiary and identification requirements?

There are some changes to the evidentiary requirements (see s 68).  Amendments have been made to the required forms.  The following updated forms must be used for transactions entered into on or after 19 May 2022:

  1. Application for Exemption or Refund – Break-up of marriage or de facto relationship (ODA 069); and
  2. Purchaser/Transferee Declaration form for individual (ODA 076 I)

 

Click here to read Part 1: Duty payable on options – and other important duty changes

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Authors:

Malcolm Campbell & Luke Barber

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