On 17 June 2009, the NSW government proposed substantive amendments to the Duties Act 1997 with the release of the State Revenue Legislation Further Amendment Bill 2009 (Bill). In addition to other miscellaneous amendments, the Bill proposes to introduce general anti-avoidance provisions, and to make significant changes to the land rich duty (to be renamed "landholder duty") and mortgage duty rules. These proposals are summarised below.
1. General Anti-Avoidance Provisions
The Bill proposes to introduce general anti-avoidance provisions which will apply to a scheme that is entered into, made, or carried out (regardless of when it was first made or entered into) on or after 1 July 2009 for the sole or dominant purpose of avoiding or reducing a liability for duty. The Chief Commissioner may have regard to a number of expansive factors in his determination to apply these provisions and assess duty together with interest and penalties.
2. Landholder Duty
Under the proposed Bill, a "landholder" is any public or private company or trust (including listed entities) that directly or indirectly holds NSW land with a market value of $2 million or more, regardless of what proportion the value of its assets is comprised of land. The landholder duty will be triggered on an acquisition (by way of an issue, transfer or other dealing), from:
- 1 July 2009, of a 50% or more interest in any private landholder. The amount of duty payable will be up to 5.5% of the value of that landholder's NSW land and dutiable goods (for example, plant and equipment but not trading stock); and
- 1 October 2009, of a 90% or more interest in any public landholder unless the intended acquisition was announced to the market before 17 June 2009. The amount of duty payable will be up to 0.55% of the value of that landholder's NSW land and dutiable goods.
In comparison with the current rules, the key differences are as follows:
- the "60% land to all property ratio" test (otherwise known as the second limb of the land rich test) will be removed. In this regard, an entity may be a landholder even if it owns significant non-land assets;
- acquisitions in public entities (eg; public entity takeovers) may be subject to landholder duty. These types of entities are outside the current rules;
- the minimum acquisition threshold for both private companies and private trusts will be 50%. Under the current rules, the minimum acquisition threshold for private trusts is 20%; and
- duty will be assessed on the value of the landholder's NSW land and dutiable goods, and not just the NSW land.
3. Mortgage Duty
From 1 July 2009 until its proposed abolition on 1 July 2012, the Bill proposes the following substantive changes to the mortgage duty rules:
- the removal of the distinction between limited and unlimited securities because the duty will be assessed by reference to the amount of advances "secured", regardless of the amount of advances "recoverable";
- the duty payable on a multi-jurisdictional mortgage in respect of a further advance will be the difference between the total duty chargeable on the total advances secured and the amount of duty previously paid. This is to be contrasted with the current calculation by reference to the amount of the further advance. The revised calculation methodology may result in increased duty where the NSW proportion increases over time;
- the removal of the option to stamp before advances are made. Securities will be required to be stamped or upstamped (as appropriate) each time an advance or further advance is made during the term of the facility. It remains to be seen how the OSR will administer this;
- the duty will be payable on "no advance" or "deferred purchase" arrangements; and
- the removal of the "28-day period" rule from the mortgage package provisions.
These proposed amendments will apply to pre-1 July 2009 structures in respect of any advance or further advance made on or after the date.