Landholder duty only applies to relevant acquisitions of shares in companies or units in unit trusts that hold interests in land in NSW with a threshold value of $2 million or more. Currently the relevant land value is the unimproved land value as determined each year by the Valuer-General and it is the acquirer of the shares or units that is liable to landholder duty. Landholder duty is charged at the same rate as stamp duty.
The change proposed is that the relevant land value will instead be the unencumbered land value. This will be the market value of the land including buildings and anything fixed to the land (eg office fit-outs and equipment bolted to the floor).
This is a significant change as the unencumbered land value will in most cases be substantially greater than the unimproved land value. Hence once enacted, these changes will result in the landholder duty provisions applying to companies and unit trusts that were previously under the threshold value.
A further proposed change is that landholder companies and trusts will be jointly liable for the duty payable by the acquirer of the shares or units. This means that both the acquirer and the landholder will be liable to the duty, but the landholder will be entitled to recover as a debt any amount of landholder duty paid from the acquirer. This change will provide Revenue NSW with the ability to place a charge on the land for which a caveat can be registered, in the event that the landholder duty is not paid.
Should you be concerned about these changes or for more information please contact our Tax & Estate Planning Team.
UPDATE: On 18 June 2020 the Bill setting out these changes was passed by the NSW Parliament and received assent on 24 June 2020. The changes take effect from the date of assent.