On 22 October 2019, the NSW Government tabled the State Revenue Legislation Further Amendment Bill 2019.

This proposes material changes to the Duties and Land Tax regimes in NSW which we announced . 

The changes commence upon royal assent, which is expected to occur in the coming days. The most important changes are:

Landholder duty regime broadened – now to catch many more M&A deals

It has been the case that many M&A deals, where the underlying business holds land and/or leases in NSW, could be implemented without incurring landholder duty. The changes move the dial considerably and will:

  • Replace the $2m land threshold from being assessed on the unimproved value of freehold land, to the market value of the freehold land (i.e. now including the value of buildings).
  • Broaden the “land” test from common law concepts such as fixtures to now include things “fixed to land”. 

These changes will now catch, for example, businesses operating on leases but with fitouts exceeding $2m as well as manufacturing sites with expensive plant and equipment fixed in some way to the building. This broadens the scope of landholder duty from what it was originally intended to catch (i.e. using indirect transfers of land to avoid transfer duty) to now potentially applying to the sale of what one might not think of as a “landholding” business.

Some worked examples here illustrate the issue (all approximate).

Manufacturing business

Asset category


Landholder value

    Pre-changes Post-changes

Unimproved $1.5m

Market $4m

$1.5m $4m
Plant and equipment $3m Not counted $3m
Goods $5m Not counted due to values above >$2m $5m
Duty Nil $660k

Retail business

Asset category


Landholder value

    Pre-changes Post-changes

Market lease - assume nominal

Nil Nil
Fixed fitout (not fixtures) $3m Not counted $3m
Goods $5m Not counted due to values above >$2m $5m
Duty Nil $440k

While these changes bring NSW into step with most other States and Territories, it is an expansion of the landholder duty base nonetheless. It is also interesting that the NSW Government has pressed ahead with this given recent overtures to abolish stamp duty altogether.

Put and Call Options – potential double duty

Chapter 3 of the Duties Act 1997 (NSW) has long made certain assignments and nominations effectively subject to double duty by treating them as two separate transfers. However, they previously did not potentially apply to an arrangement where the option is relinquished coupled with an agreement to sell the land to a third person. Such an arrangement is now included in the provisions so that full ad valorem duty can effectively apply to both the option and the transfer.

Target now jointly liable for landholder duty

The party liable for landholder duty on the acquisition of an interest in a company or unit trust is the acquirer. The changes now make the landholder itself jointly liable, with an unpaid liability creating a charge on the underlying land, with the ability for the Chief Commissioner to place a caveat on the land. Quite often CFOs and tax managers in Australia, where the company or unit trust has been bought (eg through private equity or an offshore acquisition) have not needed to be concerned about any tax impact on the target itself. Prudently, Australian CFOs and tax mangers should now make the relevant inquiries of its new owner to determine that landholder duty has been properly reviewed, and landholder duty paid if applicable.

Foreign surcharges – time is running out to amend discretionary trusts

Taxpayers have until 31 December 2020 to change their trust deeds such that they are not inadvertently deemed to be “foreign persons”. The changes make it clear that all discretionary trusts are “foreign persons” for duties and land tax surcharge purposes unless the trust deed prevents a foreign person from being a beneficiary of the trust. While this was already the practice of the NSW Government, the Government has been quite lenient in allowing taxpayers to change their trust deeds until now. Please see our previous articles which outlines our thoughts on the practical issues surcharges have on discretionary trusts.

This directly affects trusts which have acquired residential land since 21 June 2016 or have held residential land for a land tax year from 2017 or later.

Surcharges can more than double the tax otherwise payable and is a material cost to buying or holding residential land in NSW.

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