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NSW Budget 2023-24
On 19 September 2023, the NSW Treasurer, the Hon. Daniel Mookhey MLC, handed down the 2023-2024 NSW State Budget (September 2023 NSW Budget).
Under the September 2023 NSW Budget, the NSW Treasury are forecasting a budget deficit of A$7.8 billion in the 2023-24 financial year. Thereafter, the NSW Treasury expect NSW Budget to return to surplus of $844 million in 2024-25.
On 19 September 2023, Treasury and Revenue Legislation Amendment Bill 2023 (NSW) was introduced into the NSW Parliament and once passed, implement the measures announced in the September 2023 NSW Budget which are to commence on 1 February 2024.
The budgetary measures propose to amend the following legislation:
a. Duties Act 1997 (NSW)
b. Electric Vehicles (Revenue Arrangements) Act 2021 (NSW)
c. Land Tax Management Act 1956 (NSW)
d. Taxation Administration Act 1996 (NSW)
Other amendments are proposed to the Payroll Tax Act 2007, however we understand these changes are merely corrections of errors and do not implement any of the current NSW budgetary measures.
Amendments to the Duties Act 1997
Corporate Reconstructions and Consolidations Concession
Under the Duties Act 1997 (NSW), corporates are exempt from duty (formerly known as stamp duty) when transferring assets between entities during a restructure.
The exemption from duty for eligible corporate reconstruction transactions and corporate consolidation transactions will be replaced with a concession of 10% of the of duty that would otherwise be payable.
The concession will apply to transactions that occur on or after 1 February 2024.
The transitional provisions provide an exception for transactions that arise from an agreement or arrangement entered before the amending legislation was introduced to NSW Parliament and for which an exemption application is lodged on or before 1 April 2024 and is approved. In these circumstances, the full exemption will continue to be available.
A new significant interest acquisition threshold for private unit trusts
Certain NSW landholder duty changes will be made and that apply to private unit trusts
Landholder duty is charged on acquisitions of a significant interest (being 50% or more) in private companies and unit trusts that directly or indirectly hold NSW land with an unencumbered value of $2 million or more.
From commencement of the new provisions, amended thresholds will apply for holdings in private unit trusts that are NSW landholders.
A 20% significant acquisition threshold will apply to most private unit trusts. Prior to these amendments, the acquisition threshold for a private unit trust was 50%.
According to the Minister Finance press release dated 19 September 2023, the changes to NSW landholder duty will “discourage the use of private unit trusts for tax minimisation and more closely align NSW’s tax regime with other states.”
However, the 50% threshold will be retained for acquisitions in wholesale unit trusts or imminent wholesale unit trusts that are registered with Revenue NSW. In order to mitigate the above new rules (including new section 157AD of the Duties Act 1997 (NSW)) – wholesale unit trusts will be able to register with Revenue NSW to restore the 50% threshold under the 2023 and prior year rules.
The 50% acquisition threshold for private companies and the 90% threshold for public landholders remain unchanged.
The threshold for the tracing of property through ‘linked entities’ of a landholder will also be amended from 50% to 20% such matters require careful review of existing structures if certain landholders are to become landholders for the first time. Such matters require careful review of existing structures if certain landholders are to become landholders for the first time.
The changes to the landholder duty provisions will apply to acquisitions that are completed on or after 1 February 2024 unless they arose from an agreement or arrangement entered before the amending legislation was introduced to NSW Parliament.
Increase in fixed and nominal duty amounts
Fixed or nominal duty is currently charged in respect of various transactions throughout the Duties Act 1997 (NSW). These charges have been unchanged since 1 January 2009.
From 1 February 2024, duty of:
End to the NSW duty exemption for certain zero and low emission vehicles
The exemption from motor vehicle registration duty ceases to be available to zero and low emission vehicles from 1 January 2024.
The transitional provisions allow battery electric vehicles and hydrogen fuel cell electric vehicles purchased (or for which a deposit was paid) before 1 January 2024 but that had not yet been registered by that date to continue to access the exemption.
Amendments to the Land Tax Management Act 1956 (NSW)
Minimum 25% ownership for the principal place of residence NSW land tax exemption
Changes to the Land Tax Management Act 1956 (NSW) close a loophole which enabled taxpayers with as little as one percent stake in a NSW property to claim the principle place of residences land tax exemption.
Currently under existing NSW land tax rules, land may currently be exempt from land tax where only one of multiple owners occupies the property as a principal place of residence even in cases where they own only a tiny proportion of the property.
Following the amendments, the NSW land tax exemption for principal place of residence will only be available to a person occupying the property as their principal place of residence who owns an interest of at least 25% in the property.
The transitional provision provides that those who already claim the principal place of residence exemption from NSW land tax but own less than a 25% interest in the land may continue to claim the exemption for the 2024 and 2025 land tax years. The minimum 25% ownership requirement will then apply to those owners from the 2026 land tax year.
Amendments to the Taxation Administration Act 1996
Clarify the grounds for remission of interest
The interest rate applied to tax defaults is the sum of two amounts– a market rate component (the bank accepted bill rate) and a premium component (set at 8%). This amendment provides that interest (including the premium component) may only be remitted in accordance with guidelines made by the Chief Commissioner of State Revenue. We understand Revenue NSW will issue guidelines after 1 February 2024.
Other measures – Increases to NSW Coal Royalties
Other legislation will be introduced to increase NSW Coal royalties by 2.6% and effective 1 July 2024 and as follows:
a. Open cut coal – an increase from 8.2% to 10.8%
b. Underground coal – an increase from 7.2% to 9.8%
c. Deep underground coal – an increase from 6.2% to 8.8%
[Source: Revenue NSW summary dated 19 September 2023, NSW Treasurer Budget speech dated 19 September 2023, NSW Minister for Finance Media Release dated 19 September 2023, NSW Budget paper No 2, Chapter 4) and Revenue Legislation Amendment Bill 2023 (NSW)].