On 19 September 2023, the NSW Treasurer handed down the 2023-2024 NSW State Budget. The Treasury and Revenue Legislation Amendment Bill 2023 will, once passed, implement several key measures announced in the Budget. The measures, to commence on 1 February 2024, include change in duty provisions which align New South Wales with Victoria and introduce significant change. Here is a concise breakdown of these budget amendments and key dates.

CORPORATE RECONSTRUCTION EXEMPTION SCRAPPED, TO BE REPLACE BY A CONCESSION

We bid adieu to the corporate reconstruction exemption (CRE) from 1 February 2024. Instead, corporate reconstruction concession will apply, providing a 90% reduction in duty for eligible transactions.  For example, a liability of $1,000,000 that would previously be reduced to $0 will now be subject to $100,000.

This measure undoubtedly imposes a burden on restructuring efforts. Many groups will now find it necessary to conduct a cost-benefit analysis to weigh the expenses associated with the concession against the disadvantages of maintaining a less-than-ideal structure.

Note: Transitional arrangements exist for transactions that would have been exempt under the CRE and are linked to agreements entered into before the amending legislation was introduced to Parliament. For such transactions the full exemption will apply if an application for the exemption is made and approved by Revenue NSW by 1 April 2024.

LANDHOLDER DUTY THRESHOLD ADJUSTMENT

Currently, in NSW, landholder duty is levied on substantial interest acquisitions in landholders. In the case of private companies and unit trusts, a substantial interest equates to 50% or more ownership. Further, for that entity to be considered a landholder, it must possess NSW land with an unencumbered of $2 million or more.

As part of the budget the substantial interest threshold for private unit trusts has decreased from 50% to a new threshold of 20%. This new threshold will also apply to the tracing provisions. The new threshold applies to acquisitions completed on or after 1 February 2024.

Note: The 50% threshold will be retained for wholesale unit trusts, imminent wholesale unit trusts and private companies.

PRINCIPAL PLACE OF RESIDENCE (PPR) UPDATE

For land tax purposes an exemption exists where a residential land is used and occupied an owner as its PPR. Currently the exemption may apply even where a small ownership interest is held by the taxpayer. As part of the proposed amendments the PPR exemption now only applies where a taxpayer’s ownership interest in a property is at least 25%.

Note: If the PPR exemption has already been claimed on interests less than 25% then the claim may continue for the 2024 and 2025 land tax years.

These budget adjustments introduce changes that every taxpayer, business and investor should understand. For a more in-depth analysis or personalised guidance tailored to your unique circumstances, please contact one of our specialists.