NSW State Taxes – Update

NSW Budget 2020-2021

The NSW Budget 2020-2021 released on 17 November 2020 announced changes to stamp duty and land tax which will fundamentally change the way that property owners pay tax to the NSW Government. If you’re a home owner, or a potential home owner in the future, this is an important change for you.

The current system sees purchasers of property subject to stamp duty on the transfer of dutiable property (such as your home). Investors with property which are above certain thresholds are currently subject to land tax which is based on the unimproved value of that land.

The NSW Government has flagged a change in the way current state taxes are collected to phase out stamp duty altogether.

The Government will seek to do this by replacing stamp duty by allowing purchasers to opt for an annual tax on land value which would be a fixed rate amount applied to the unimproved value of the individual property. This is a similar approach to the rates you may pay from your local council.

The Government has flagged that if you have already paid duty on your property, then you will not be subject to the annual property tax.

As buyers will be given a choice of which tax to pay, this can lead to those who wish to stay in their home for longer opting to pay duty, or those who may be looking at property as an investment reduce their upfront costs by opting to pay the annual property tax.

First Home Buyers exemptions have been flagged to be scrapped, with a potential $25,000 grant being provided to first home buyers instead.

The Government is currently consulting in relation to these changes and we will continue to keep you updated as these potential changes are refined.

Discretionary Trusts

If you are a trustee or control a corporate trustee of a discretionary trust which owns residential property, or the trust intends to purchase residential property in the future, it is imperative that you have updated your trust deeds!

The State Revenue Legislation Further Amendment Act 2020 received assent on 24 June 2020. This legislation amended the Land Tax Act 1956, Land Tax Management Act 1956 and Duties Act 1997. This legislation will deem trustees of discretionary trusts to be a foreign trustee if the trust does not prevent foreign persons from being a beneficiary of the trust.

Any discretionary trust which holds residential property and does not specifically prevent foreign persons from receiving trust distributions will be subject to surcharge stamp duty and land tax.

For land tax purposes, trust deeds will require amending prior to 31 December 2020. After this, the surcharge land tax will apply. Surcharge purchaser duty will apply when a dutiable transaction arises for the trust.

If you are a trustee or control a corporate trustee of a discretionary trust this is a must to review.

If you would like to discuss any state tax issues please feel free to contact us.

Leave a Comment

Your email address will not be published. Required fields are marked *