NSW Government proposes to significantly expand scope of existing stamp duty regime

9 minute read  24.03.2022 Rebecca Barbour, Nathan Deveson

The new Bill proposes to bring transactions and statements to duty that are currently not caught, and target taxpayers and advisers alike with the re-write of the anti-avoidance provisions. These changes are noteworthy, particularly in light of the Government's live proposal to phase out stamp duty in favour of a broad based property tax.


Key takeouts


  • The NSW Government has introduced a Bill which, if enacted, will significantly change the current stamp duty regime within the Duties Act 1997 (NSW) (Act). These amendments have been introduced 16 months after the Government announced its proposal to phase-out stamp duty in favour of a broad-based property tax.
  • The State Revenue and Fines Legislation Amendment (Miscellaneous) Bill 2022 (NSW) (Bill) proposes two new types of dutiable transactions: acknowledgements of trusts, and changes in beneficial ownership.
  • In addition to broadening the duty base, the amendments redefine and broaden the anti-avoidance rules, applying it to all state taxes (rather than just duty), and introduce a promoter penalty regime which targets advisers.

The State Revenue and Fines Legislation Amendment (Miscellaneous) Bill 2022 (NSW), introduced into the NSW Legislative Assembly on 23 March 2022, proposes to significantly amend the Duties Act 1997 (NSW) by:

  1. broadening the existing duty base by taxing acknowledgements of existing trusts and changes in beneficial ownership;
  2. re-writing the (currently untested) anti-avoidance provisions; and
  3. introducing penalties for promoters of tax avoidance schemes.

The Bill was introduced into the NSW Legislative Assembly on 23 March 2022. It is innocuously described as (relevantly) making 'miscellaneous amendments to legislation relating to State revenue and fines', yet its subtleties end there. This Bill, if enacted, will significantly expand both the scope and administration of NSW state taxes.

Changes in beneficial ownership

The significant amendment proposed by the Bill is the introduction of duty on a transaction 'that results in a change in beneficial ownership of dutiable property, other than an excluded transaction'. The Explanatory note to the Bill states that the provisions are modelled on similar provisions within the Duties Act 2000 (Vic), but they will have wider application because:

  • of the broader concept of 'land' as a category of 'dutiable property' in NSW; and
  • excluded transactions will be dutiable if part of a scheme or arrangement that, in the Chief Commissioner's opinion, was made with a collateral purpose of reducing the duty otherwise chargeable under Chapter 2 of the Act.

The person who obtains the beneficial ownership, or whose beneficial ownership is increased, will be liable, when the beneficial ownership changes, to pay duty on the dutiable value of the property the beneficial ownership of which is changed.

These provisions fundamentally change the tax base for duty in NSW, and change it from a tax on transfers of property to one on the creation, extinguishment or transfer of property. Accordingly, many previously non-dutiable transactions, such as the grant of options or a lease may now be dutiable (although this may be an unintended consequence). A potentially broad range of transactions will be affected by this amendment and will arguably require lodgement with the Chief Commissioner in the absence of further clarification within the legislation, yet to be drafted regulations, or guidance from Revenue NSW.

The change in beneficial ownership provisions will only apply to transactions that occur from the date that the provisions commence. The provisions will not apply to transactions that occur after that date if the relevant transaction occurs in accordance with an agreement or arrangement entered into before the provisions commenced.

Acknowledgements of trust

Another significant amendment proposed by the Bill is to charge duty on:

the making of a statement that –

  • purports to be a declaration of trust over dutiable property, but
  • merely has the effect of acknowledging that identified property 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.

The statement will be taken to be a declaration of trust over dutiable property and, accordingly, a dutiable transaction.

The person making the statement will be liable, at the time the statement is made, to pay duty on the dutiable value of the property vested or to be vested in that person.

The Explanatory note to the Bill states that this amendment is in response to the judgment of the Court of Appeal in Chief Commissioner of State Revenue v Benidorm Pty Ltd [2020] NSWCA 285. In Benidorm, the Court of Appeal held that an instrument that merely acknowledged an existing trust over a Sydney apartment was not dutiable as a declaration of trust over dutiable property, notwithstanding that it satisfied the statutory definition of a dutiable declaration of trust. The Court cited the rewrite of the Act in 1997 as a fundamental shift away from a tax on instruments to a tax on transactions. Consequently, it held that an instrument is not dutiable if it does not have any operative effect and does not otherwise identify a transaction which engages the Act.

The Benidorm decision was an upset for the Chief Commissioner, who assesses taxpayers with duty based on a strict application of the 'declaration of trust' definition in the Act. In our experience, the issue of a re-declaration of trust only arose in circumstances of a mistake or where advice was not obtained.

In our view, this proposed amendment overreaches Benidorm and may tax statements that acknowledge existing trusts in numerous contexts, including within the context of transaction documents that need to identify the capacity in which dutiable property is held, such as custodian arrangements.

Anti-avoidance re-write

The Bill also proposes to remove the current anti-avoidance regime and insert a complete new regime within the Taxation Administration Act 1996 (NSW) (TAA). The insertion of the anti-avoidance provisions within the TAA makes sense, as they are able to apply more broadly to all state taxes. What is interesting is that the anti-avoidance provisions have been re-written in circumstances where their application has never been considered by the courts.

The current anti-avoidance rules are aimed at deterring artificial, blatant or contrived schemes to reduce or avoid liability for duty. The proposed amendments are aimed at deterring all schemes to avoid tax liability. The removal of the 'artificial, blatant or contrived' gateway for a scheme means that normal commercial (market standard) behaviour may fall within the new rules.

The Bill provides that a tax avoidance scheme is a scheme entered into, made or carried out for the sole or dominant purpose of enabling a tax liability to be avoided. 'Avoid' is broadly defined; a reference to avoiding tax, or payment of tax, includes a reference to postponing payment of tax, and a reference to avoiding tax liability includes a reference to reducing or postponing tax liability. As such, under the new rules, entering into a put and call option (without other dominant commercial purposes) rather than a conditional contract may be construed as a tax avoidance scheme.

A person is liable to pay the amount of tax avoided by them as a result of the tax avoidance scheme, being the amount of tax that would have been payable, or that it is reasonable to expect would have been payable (assuming the same economic or commercial outcomes) if the tax avoidance scheme had not been entered into, made or carried out.

These provisions apply to schemes that are entered into, made or carried out from the date that the provisions commence.

Promoter penalties

The proposed anti-avoidance provisions include provisions about the promotion of tax avoidance schemes, which the Explanatory Note states 'are similar to equivalent provisions in the Taxation Administration Act 1953' (Cth) (Cth TAA). However, the promoter penalty regime proposed by the Bill appears to have a broader application than its Commonwealth counterpart.

Structurally, the promoter penalty regime in the Cth TAA (which deals with promoters of tax exploitation schemes) sits outside the general anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936 (Cth) (Part IVA) (which deals with schemes entered into or carried out for the purpose of obtaining a tax benefit). Here, it is proposed that the promoter penalty regime sits within the anti-avoidance provisions and targets promoters of tax avoidance schemes.

The definition of a 'promoter' of a tax avoidance scheme in the Bill is a person who 'markets the scheme or otherwise encourages the growth of the scheme or interest in it'. This is quite a low watermark compared with the equivalent provision in the Cth TAA, which also requires the promoter or an associate to receive consideration in respect of that marketing or encouragement, and a conclusion, having regard to all relevant matters, that the promoter has had a substantial role in respect of that marketing or encouragement.

A person is not a promoter merely because they provide advice about the scheme or distribute information or material about the scheme prepared by another person, consistent with the Cth TAA provisions.

If a person engages in conduct that results in a person being a promoter of a tax avoidance scheme, they may be ordered by the Supreme Court (on application by the Chief Commissioner) to pay a maximum civil penalty of $1,109,900 for an individual, or $5,549,500 for a corporation.

The Chief Commissioner must not make an application if the scheme is based on treating a taxation law as applying in a particular way, which agrees with advice or an approved statement given by the Chief Commissioner.

These provisions apply to schemes that are entered into, made or carried out from the date that the provisions commence.

Penalty tax

The Bill proposes a doubling of the rate of penalty tax payable for a tax default by a significant global entity (as defined in the Income Tax Assessment Act 1997 (Cth), which, among other things, requires an entity to have, or be in a group with a global parent entity which has, annual (consolidated) global income of at least A$1 billion). This will see an increase in the standard penalty tax rate from 25% to 50% for those entities.

Whilst the Bill contains a number of other amendments (including to the surcharge purchaser provisions), the above amendments are the most noteworthy.

If enacted, the above amendments will commence on the date of assent.

Due to the breadth of the proposed amendments, we recommend careful consideration of how they may impact any current transactions, including market-standard transactions that have not previously given rise to duty (or avoidance) implications.

Please contact us if you would like to discuss any of these issues in more detail.


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