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NSW Duty Reform – Duty on changes in beneficial ownership


The NSW Government recently introduced a number of amendments to the Duties Act 1997 (NSW) which have resulted in the broadening of transactions liable to duty. These amendments were brought about under the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW) (Amending Act). Following the Amending Act, duty will now be payable on transactions causing a change in the beneficial ownership of dutiable property and on acknowledgements of a trust over dutiable property. These two categories are discussed in further detail below.


Changes in beneficial ownership


Prior to the Amending Act, duty was chargeable on certain transactions that alter the legal ownership of dutiable property. These include a sale, a transfer, a declaration of trust and a vesting under statute or court order relating to lan.

The effect of the Amending Act is to close the loop hole that allows for the avoidance of duty by structuring affairs such that, while there is no change in the legal ownership of dutiable property, the beneficial ownership changes. Consequently, the Amending Act now imposes a catch all provision that duty on “another transaction that results in a change in beneficial ownership of dutiable property, other than an excluded transaction”.[1]


As such, a transaction that does not constitute a legal transfer of property may still be dutiable if it effects a change in beneficial ownership of dutiable property. For instance, if a fixed trust owns land within NSW in the name of the trustee and a beneficiary of that trust disposes their interest to another beneficiary, duty may be payable on the interest acquired by the remaining beneficiary.


The Amending Act defines ‘change in beneficial ownership’ to include the following:


(a) the creation of dutiable property;

(b) the extinguishment of dutiable property;

(c) a change in equitable interests in dutiable property;

(d) dutiable property becoming the subject of a trust; and

(e) dutiable property ceasing to be the subject of a trust.[2]


The table below summarises some of the transactions which, because of a change in beneficial ownership of dutiable property, may now attract duty. Also listed are transactions expressly excluded from incurring duty, despite involving a change in beneficial ownership of dutiable property.

Transactions Liable to Duty

Transactions Excluded from Liability

Granting of an option to purchase land in NSW

Purchase, gift, issue or allotment of units in a unit trust scheme

Granting, renewing or varying leases for consideration

Cancellation, redemption or surrender of units in a unit trust scheme

Granting of easements for consideration

Granting of a lease for no consideration

Creation of a life tenancy

Granting of an easement for consideration

Change in a trustee’s right of indemnity

Provisions of a security interest within the meaning of the Personal Property Securities Act 2009 (Cth)

Of significance, the granting of a call option to purchase land constitutes the creation of dutiable property in the form of an option to purchase land in NSW. As a result of the Amending Act, a purchaser calling on a vendor to sell real property pursuant to a call option agreement triggers a dutiable transaction. In such instances, Revenue NSW recognises a dutiable liability arises on the date the option is granted and requires payment of duty on the value of the call option fee. If no fee is paid for the grant of the option, nominal duty of $10 is payable.


Duty paid on the option fee will not be credited towards the duty payable on the actual transfer of legal ownership following exercise of the option. If the call option is not exercised, a refund of duty will not be issued for duty paid on the grant of option.


A duty liability still arises on the acquisition of a significant interest in a unit trust scheme or company that has land holdings in NSW with an unencumbered value of $2 million or more.[3] A land holding excludes the estate or interest of a mortgagee, charge or other secured creditor.


Duty on acknowledgments of trust


The Amending Act has introduced duty on ‘acknowledgements’ of trust.[4] Prior to this, only ‘declarations’ of a trust were dutiable.[5] This amendment came about following a recent case in the Court of Appeal which held the declaration of trust in question fell short of incurring duty because it must actually effect a transaction, and not merely acknowledge an existing state of affairs.[6] Accordingly, no duty was payable.


The effect of this amendment is that a duty liability now arises rather broadly on the making of a statement that has the effect of acknowledging that identified dutiable 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. Where a trust acknowledgement is dutiable, duty will be payable by the person making the statement and will be calculated on the value of the dutiable property at the time of the acknowledgement of the trust.


Trustees must now be particularly careful in executing any document which contain statements regarding their capacity or wording capable of being construed as a declaration of a trust, even if the relevant trust has already been declared.


The NSW duty regime has certainly shifted, capturing an extremely wide range of transactions. Unsurprisingly, as a result of these changes, taxpayers will now need to be more vigilant when dealing with dutiable property to ensure they do not inadvertently trigger a duty liability. Henry William Lawyers can assist with any related enquires. Feel free to contact our people:


Ron Zucker 0410 590 111

Eollyn Cortes 0478 727 395

Chelsea Woodward 0404 065 899

Anna Polhill 0431 174 352

[1]Duties Act 1997 (NSW) s8(1)(b)(ix). [2]Duties Act 1997 (NSW) s8(3). [3]Duties Act 1997 (NSW) s146. [4]Duties Act 1997 (NSW) s8AA. [5]Duties Act 1997 (NSW) s8(1)(b)(ii). [6]Chief Commissioner of State Revenue v Benidorm Pty Ltd [2020] NSWCA 285.

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