NSW budget: Key tax measures to raise $1bn

The NSW government has unveiled a series of key tax measures aimed at property investors, landholders, and corporations, as it looks to fund new initiatives aimed at combatting cost of living and improving social and transport infrastructure.

The new tax measures are set to secure almost $1 billion in revenue over the next four years, NSW Treasurer Daniel Mookhey has revealed.

The changes include a measure that will now require individuals who use and occupy the land as a principal place of residence together to have a minimum 25 per cent stake in a property to claim the exemption, compared to the current rules which allow as little as a one per cent stake in the property.

BDO Tax Partner Fady Abi Abdallah said the change would close a loophole, with investors holding multiple properties set to be affected.

“People will now need to revisit their existing ownership structure if they still wish to access the principal place of residence land tax exemption,” said Mr Abi Abdallah.

Another tax change set to affect investors and landholders is the reduction in threshold for the application of landholder duty with respect to private unit trusts.

Mr Abi Abdallah said the measure would most likely affect high net wealth groups and other investors who use private unit trusts.

“Currently, where you transfer a significant interest—50% or more—in a landholder then that would trigger landholder duty which is effectively duty at land rates on the transfer of that ownership,” said Mr Abi Abdallah.

“What this measure does is reduce the definition of significant interest from 50% to 20% in respect of landholders that are private unit trusts.”

“Investors need to be extra careful in any future changes to unit holdings given that the hurdle of paying duty has been reduced from 50% to 20%.”

“This could have significant impact on property owners’ decisions or on the vehicle that they use to invest or hold land in NSW.”

The NSW government is also set to remove the corporate reconstruction and consolidation duty exemptions and replace them with a concessional duty rate.

“Currently, certain transfers of assets between members of a corporate group are exempt from duty in NSW, but under the proposed regime, the exemption will be replaced by a concessional duty which is charged at 10% of the duty that would otherwise be payable on the transfer of those assets,” said Mr Abi Abdallah.

“So rather than saving 100%, you are now only saving 90%. Businesses will need to factor this into the cost of restructuring any corporate groups in the future.”

“This new regime will bring NSW in line with Victoria, and is set to have an impact on a wide range of businesses.”

Mr Abi Abdallah also believes taxpayers should pay heed to the state government’s additional investment in the compliance systems of Revenue NSW.

“Taxpayers need to be more vigilant to ensure they comply with their tax obligations given the additional investment increases the chances that they are going to be reviewed,” he said.

 

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