Contracts Over $20M
As of 8 October 2024, significant changes have been introduced for property transactions in New South Wales. Specifically, any transactions involving contracts for sale of land with a duty value of $20 million or more will no longer be processed via the Electronic Duties Return (EDR) portal. Instead, they must be lodged directly with Revenue NSW via the eDuties platform.
This shift from the EDR system to eDuties will substantially impact how duty assessments will be managed. The EDR portal allows professionals like solicitors, conveyancers and accountants to electronically lodge and assess a variety of duties transactions, providing a streamlined and efficient process for duty assessment. However, with the requirement to now lodge through the eDuties portal for these types of transactions, Revenue NSW will assume full responsibility of the assessment and slower processing times will likely result.
Put and Call Option Deed
These changes are consistent with the position that Revenue NSW adopted in assessing duty on a contract that arises from an option deed. Previously, a contract that arose from an option deed could have been assessed via EDR. However, this is no longer the case as assessments are dealt with by Revenue NSW directly via the eDuties platform.
In certain circumstances (such as an option period being exercised more than 12 months after the grant of the option), Revenue NSW will require evidence of the value of the property as at the date that the option is exercised (generally in the form of a valuation by a Certified Practising Valuer). Revenue NSW will then adopt the current value of the property for the purposes of assessing the duty payable on the contract. In practical terms, duty must be paid on the greater of the contract price and the value of the property as at the date of the contract.
Methodology behind these Changes
The introduction of this policy comes at a time when Revenue NSW is actively working to minimise leakages from foreign individuals purchasing property in NSW, particularly in circumstances where a foreign individual may have an indirect interest in the property purchase. Effective from 1 January 2025, the foreign purchaser duty surcharge will increase from eight per cent to nine per cent and from the 2025 land tax year, the foreign owner land tax surcharge will also increase from four per cent to five per cent.
How this will affect Property Acquisitions
In our experience, Revenue NSW take a more diligent approach to duty assessment, creating slower turnaround times. Buyers must therefore anticipate that is may take longer for the duty assessment to be completed and thus all parties should plan for this protracted time.
This change in procedure might also require a shift in how settlement dates are set for contracts of this nature. Contracts should be drafted in a way that sets settlement dates at a period after duty assessment has been completed by Revenue NSW.