Significant Stamp Duty Changes Affecting Property Transactions

• Published date: 24 May 2022
• Law Firm: Herbert Smith Freehills
• Author: Ms Jinny Chaimungkalanont and Mark Peters

New stamp duty will be imposed on a change in beneficial ownership or a trust acknowledgement, plus a welcome change to refund foreign purchaser duty for non-residential land.

Proposed changes now in force

On 19 May 2022 the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW) (Amending Act) received the Royal Assent. The amendments to the NSW Duties Act discussed below came into force on the date of Assent.

Revenue NSW has now issued a guide to the Amending Act which casts some additional light on the proposed administration of the new provisions. However, the provisions are complex and advice should be sought before entering any transaction which may fall within their scope. A few key takeaways from the Amending Act which have been crystallised by the guide include:

• the grant of an option over dutiable property that creates an interest in the dutiable property is a dutiable transaction. It unfortunately remains unclear practically how this will be administered and it appears duty will be levied twice in the case of options involving land.¹ That is, duty could be imposed on the option fee on granting the option and again on the transfer of land pursuant to s 22(4) which aggregates any option fee with the consideration for the transfer for the purpose of determining dutiable value for duties purposes However, not all payments will be dutiable option fees, for example a genuine security deposit should not attract duty under the new provisions.
• the grant of an easement for consideration will be dutiable on the greater of the consideration and the unencumbered value of the easement. This is a new head of duty. Previously, the grant of an easement (for consideration or otherwise) was not dutiable in NSW.
• the grant, renewal or variation of a lease (if it creates an interest in land) for consideration will be dutiable on the greater of the consideration and the unencumbered value of the lease. This language is unfortunate as it creates a mismatch between the imposition of duty on a lease in respect of which a premium is paid which is presently only dutiable on the premium (no market value test).

The unanswered questions remain manifold. For example, the meaning of "beneficial ownership" in the new change of beneficial ownership provisions is unclear; that is, what quality of right / interest must exist before one can be said to take beneficial ownership? The inclusive definition of "beneficial ownership" as including a trustee of a trust casts limited light of the intended scope.

In Kent v Vessel 'Maria Luisa' (No 2)² Tamberlin and Hely JJ said (at [66]):

"Ownership, whether legal or equitable, therefore involves something greater than beneficial interest. Equitable ownership of property is commensurate with the right to relief in a Court of Equity . If a person has contractual rights in relation to a ship which, if performed will result in the person becoming the owner of the ship, then the person will be regarded as the equitable owner of the ship provided that specific performance of the contract would be decreed. Thus entitlement to a vesting order or equivalent relief would be necessary before AFE could be regarded as the equitable owner of the ship as at the relevant date." (citations omitted).

Subsequently in Ellison v Sandini Pty Ltd³ this view was affirmed and it was said "a 'beneficial owner' of an asset has more...