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Treasury and Revenue Legislation Amendment Act 2023
Corporate reconstructions and consolidations webinar
This webinar for solicitors and conveyancers outlines the 1 February 2024 changes in legislation for corporate reconstructions and consolidations in New South Wales.
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Webinar recording
The webinar covers:
the legislative changes
forms and supporting information that will be required
This is a summary of key points in response to the most popular questions raised in the webinar.
Transitional provisions
What date do applications need to be made, to access the transitional provisions?
1 April 2024 is the date by which applications under section 273F of the Duties Act 1997 need to be made to access the transitional provisions.
The transaction must arise from an agreement or arrangement entered into before 19 September 2023.
For arrangements entered into prior to 19 September 2023, what would constitute an ‘arrangement’?
There is a body of case law which considers what constitutes an ‘arrangement’ from a tax perspective.
We suggest that these cases be reviewed and a submission put forth to the Chief Commissioner to support any claim that an arrangement was entered into prior to 19 September 2023.
Corporate group definition
Do applications apply only in the case where the holding company holds 90%+ securities in the subsidiary company or where two companies have the same sole shareholder and officeholder?
The corporate reconstruction provisions apply in both scenarios on the basis that the parent is itself, a corporation (which is defined to include a unit trust scheme under section 273A of the Duties Act 1997.
The provisions will not apply where the sole shareholder is not a corporation.
In respect of the corporate consolidation provisions, there is no requirement for the holders of the affected corporation’s securities to hold a 90% interest in the affected corporation.
Rather, the requirement is for the holders of the affected corporation’s securities to hold an identical interest in the interposed corporation after the interposition is effected. See section 273E of the Duties Act 1997.
If a property is under a family trust with a corporate trustee, can it be restructured to be exempt from stamp duty and be held by company A who is a 100% shareholder?
No, a discretionary trust is not considered as a member of the corporate group for the purposes of a corporate reconstruction transaction. See section 273E(6)(b) of the Duties Act 1997.
Fixed duty amounts
As minimum duties increase from 1 February 2024, is the effective date based on date of contract, agreement, or date when the document is lodged for duties?
It is as at the liability date. For example, where the dutiable transaction is an agreement for the sale or transfer of NSW land the relevant date is the date of the contract (exchange date).
What date does the increase in minimum duty take effect, and is this for such things as duplicate contracts and collateral agreements?
These changes take effect on 1 Feb 2024. The amount of fixed duty for duplicates and counterparts has increased from $10 to $20.
Transaction documents
What are the primary transaction documents, in the context of a long term lease transfer?
The primary transaction documents for a transfer of a lease would be a copy of the lease and the instrument of transfer.
As lodgement of the draft ELNO transaction will count as an executed land transfer, will Revenue NSW be able to provide the duties assessment number on urgent basis?
Being an electronic registry instrument, a rendering of the Transfer document from the Electronic Lodgement Network Operator (ELNO) lodged with Revenue NSW is taken to be first executed when the Chief Commissioner first receives a copy of it (pursuant to section 12(4)).
The provision of an executed agreement and rendering of the ELNO Transfer prior to 1 February 2024 will be taken to be transactions occurring before 1 February 2024.
Definitions
What is meant by the term securities; is it the same as shares?
Broadly, yes and could also include units in a unit trust scheme. Please refer to the definition of ‘security’ under section 273A(1) of the Duties Act 1997.
Dutiable property
Would duty apply for a restructure from a partnership of companies to a company, where no property is held as asset, just cash and debtors?
If the assets being transferred are just cash and debtors, then the restructure will not trigger a duty liability, as cash and debtors do not constitute ‘dutiable property’ under section 11 of the Duties Act 1997.
Administrative practice
Can you request that the Duties Notice of Assessment is issued at the same time as the application, or does a second application have to be made?
If applying for:
an exemption (prior to 1 February 2024 or afterwards if the transitional provisions apply); or
concession post-transaction (for transactions occurring on or after 1 February 2024 to which the transitional provisions do NOT apply), the application will be processed and Notice of Assessment issued at the same time.
Where you have applied before undertaking a transaction, it will be necessary to lodge the transaction documents and evidence of value once executed, in order for a Notice of Assessment to be issued.
Valuations
In relation to goodwill valuation inside a reconstruction, what evidence is required?
Generally, no valuation of the goodwill is required as it is not dutiable property and not subject to duty under Chapter 2 of the Duties Act 1997.
There may be instances where the value of goodwill is relevant to a valuation of dutiable property, e.g., when considering the appropriateness of purchase price allocations to each category of asset the subject of the transaction.
