State Revenue Update | Seminar Notes | July 2019 …...State Revenue Update | Seminar Notes | July...

State Revenue Update | Seminar Notes | July 2019 Page | 1


Payroll tax 1300 139 815 8:30am – 5:00pm Monday to Friday [email protected] First home owner grant 1300 130 624 8:30am – 5:00pm Monday to Friday [email protected]

Client education [email protected] Duties 1300 139 814 8:30am – 5:00pm Monday to Friday [email protected]

Unclaimed money 1300 366 016 8:30am – 5:00pm Monday to Friday [email protected] Electronic duties returns (EDR) 1300 308 863 or 1800 086 642 8:30am – 5:00pm Monday to Friday [email protected]

Land tax 1300 139 816 7:30am – 6:30pm Monday to Friday [email protected] Small business grant 1300 241 869 8:30am – 5:00pm Monday to Friday [email protected]

Help in community languages available.

Revenue NSW GPO Box 4042 Sydney NSW 2001 DX 456 Sydney (02) 9689 6200 www.revenue.nsw.gov.au Revenue NSW: ISO 9001 – Quality Certified © State of New South Wales through Revenue NSW, 2019. This work may be freely reproduced and distributed for most purposes, however some restrictions apply. Read the copyright notice at www.revenue.nsw.gov.au.

mailto:[email protected]








http://www.revenue.nsw.gov.au/



Contents

Duties ............................................................................................................................................... 4

What is duty? ................................................................................................................................ 4

What’s new ................................................................................................................................. 10

Recent cases .............................................................................................................................. 12

Common mistakes ...................................................................................................................... 16

First Home Benefits ........................................................................................................................ 19

What are first home benefits? ...................................................................................................... 19

Common mistakes ...................................................................................................................... 22

Land Tax......................................................................................................................................... 24

What is land tax? ......................................................................................................................... 24

What’s new ................................................................................................................................. 27

Recent cases .............................................................................................................................. 30

Common mistakes ...................................................................................................................... 33

Parking Space Levy ........................................................................................................................ 37

Small Business Exemption ............................................................................................................. 38

Payroll Tax ...................................................................................................................................... 39

What is payroll tax? ..................................................................................................................... 39

What’s new ................................................................................................................................. 42

Recent cases .............................................................................................................................. 43

Common mistakes ...................................................................................................................... 45


Duties

What is duty?

Duty (previously known as stamp duty) is a tax payable on transactions over dutiable property. This

is regardless of whether or not the transaction is in writing. Examples of such transactions include:

What is dutiable property?

Section 11 of the Duties Act 1997 sets out an

exhaustive list of dutiable property. These items

are outlined in the graphic below.

The items of dutiable property that are currently

liable for duty are highlighted in green, while the

abolished items are highlighted in red.

*when transferred with other dutiable property.

✓ Agreements for the sale or transfer of land in NSW.

✓ Declarations of trust over dutiable property in NSW.

✓ The acquisition of a significant interest in a landholder.


When must duty be paid?

In most cases, duty should be paid within three months of the liability

arising. If duty is not paid on time, a tax default occurs and interest

and/or penalties is payable.

The liability to duty arises when a transfer of dutiable property occurs.

This is typically effected by a written instrument (physical or digital).

The liability date is the date on which the instrument is first executed

(signed) by any party to the transaction.

Who is responsible to pay duty?

Duty must be paid by the transferee (usually the purchaser). In the case of a declaration of trust, the

duty is payable by the trustee.

How can duty be paid?

Most dutiable transactions in NSW can be processed by Client Service Providers. These providers

take payment of duty and channel them through to Revenue NSW through lodgement of a return

(eg. Electronic Duties Return – EDR).

Certain transactions cannot be processed by Client Service Providers and must be lodged (by post)

at Revenue NSW. Examples of these transactions include: landholder transactions, reassessments

for duty and documents lodged by transferees or purchasers who do not have legal representation.

‘Off the plan’ deferral of duty

An ‘off the plan’ purchase is where an agreement or transfer is entered into for a dwelling

which is not yet developed (but will be built prior to the completion of the transaction).

It is important to remember that ‘off the plan’ does not mean an unregistered vacant block of

land.

An eligible off the plan purchase could potentially receive an additional 12 months on top of the

regular three months to pay duty.

https://www.revenue.nsw.gov.au/electronic-duties-return/find-a-client-service-provider


How is duty calculated?

Duty is charged on the dutiable value of the dutiable property included in a dutiable transaction at

the applicable rate.

The dutiable value is the greater of:

• The consideration (the money or value passing which moves the

transaction) of the dutiable transaction, and

• The unencumbered value (the actual value of the property,

disregarding encumbrances such as a mortgage) of the dutiable

property.

When is a valuation required?

When assessing the duty payable on a dutiable transaction, evidence of value may be required. In

general, evidence of value is required when the parties to the transaction are not at ‘arm’s length’

(eg. vendor is related to the purchaser), or when the purchase price does not reflect the current

market value.

Evidence of value is usually provided in the form of a valuation. The valuation should be completed

by a suitably qualified person and dated within three months of the liability date of the dutiable

transaction.

Example:

Jessica and Ryan purchase a NSW property at an auction for $770,000. When speaking to

the bank, they find out that the market value of the property is actually $800,000. Therefore,

Jessica and Ryan are required to pay duty on the unencumbered value of the property

($800,000), not the consideration ($770,000).

Evidence of value would be required if:

The parties to the

transaction are not

at arm’s length.

The purchase price

(consideration) does not reflect

the current market value.

OR


For more information on evidence of value, refer to the following revenue rulings:

• DUT 044 – Valuation of property – suitably qualified person

• DUT 012v2 – Evidence of value requirements and guidelines

• DUT045 – Market value and GST

What are the general rates of duty?

The table below displays the general rates of duty which are set out under section 32 of the Duties

Act 1997. Section 32A also sets out a premium rate of duty which applies for transfers relating to

residential land with a dutiable value of greater than $3,040,000.

Minimum threshold amount

Maximum

threshold

amount

Base

amount Fixed rate

$0 $14,000 $0 $1.25 for every $100 (or part) of the dutiable value

$14,000 $30,000 $175 $1.50 for every $100 (or part) by which the dutiable value

exceeds the minimum threshold amount

$30,000 $81,000 $415 $1.75 for every $100 (or part) by which the dutiable value


$81,000 $304,000 $1,307 $3.50 for every $100 (or part) by which the dutiable value


$304,000 $1,013,000 $9,112 $4.50 for every $100 (or part) by which the dutiable value


$1,013,000 - $41,017 $5.50 for every $100 (or part) by which the dutiable value


Example:

Mr and Mrs King decide to sell their four bedroom family home in Bondi, to their three children.

They decide to sell the property for the price they paid for it 30 years ago ($250,000).

In this situation, evidence of value must be obtained as the transfer is not at arm’s length

(related persons) and the consideration shown on the transfer ($250,000) is not reflective of

the current market value.

Please Note:

These rates apply from 1 July 2019. For transfer duty rates prior to 1 July

2019, please see our website www.revenue.nsw.gov.au.



Are there any exemptions or concessions from duty?

There are a number of exemptions and concessions available from duty under

the Duties Act 1997.

Some of the most common duties exemptions and concessions are listed in the

below table with relevant section references to the Duties Act 1997.

Reference Description

Section 18(2) Transfers in conformity

Section 18(3) Transfers not in conformity but to related persons

Section 54 Change in trustee

Section 55 Transfers from an apparent purchaser to a real purchaser

Section 63 Transfers pursuant to a will (deceased estates)

Section 65

Other exemptions from duty, including:

• Manufactured homes

• Correction of error

• Special disability trusts

• Fraudulent or void transactions

• Shared equity schemes

Section 68 Transfers as a result of a break-up of marriage or other relationships

Section 104B Transfers of residential land to married couples or de facto partners

Section 104C Transfers of land used as principal place of residence and for other purposes

Section 273 Transfers relating to corporate reconstructions and consolidations

Section 274 Transfers of certain business property between family members

Section 275 Transfers to charitable and benevolent bodies

Section 278 Department of Housing and Aboriginal Housing Office tenants

What is a purchaser/transferee declaration?

The purchaser/transferee declaration is a mandatory form that must be completed by every person

entering into a transaction that results in the acquisition of land in NSW. Information collected

through the purchaser/transferee declaration is necessary to meet Commonwealth Reporting

Requirements and our responsibilities to administer the Duties Act 1997.

Each purchaser/transferee will need to complete their own declaration and have it witnessed in

accordance with the Oaths Act 1900.

Under the Taxation Administration Act 1996 the purchaser/transferee must provide all relevant

information to enable duty to be assessed on a dutiable transaction. It is an offence to provide false

or misleading information. By signing the form, you declare that the required evidence will be

presented to Revenue NSW upon request. The evidence required is set out in the explanatory notes

and supporting evidence requirements.


Surcharge purchaser duty

Foreign persons who acquire residential

property in NSW must pay a surcharge

purchaser duty of 8% on top of any transfer

duty payable. Surcharge purchaser duty first

commenced on 21 June 2016 with a rate of

4%. This increased to 8% from 1 July 2017.

The surcharge is paid in addition to the

transfer duty payable on the acquisition of

residential property. It’s important to note that

foreign persons are not eligible for the 12

month deferral for surcharge purchaser duty

for residential properties bought off-the-plan. I

Transactions that are exempt from duty are generally exempt from surcharge purchaser duty. For

more information on surcharge purchaser duty, see our website.

To determine whether or not an individual is a foreign person, refer to the flowchart below.

Please Note:

As a result of the 2019 State Budget, the ‘exempt permanent resident’

exemption has been extended to further visa classes. For more information on

this change, refer to the ‘What’s New’ section of these seminar notes.


What’s new

Indexation of duty thresholds

As a result of the 2019 State Budget, the government is introducing indexation for duty thresholds.

Thresholds will be adjusted in line with the latest Consumer Price Index for Sydney on 1 July each

year. The first changes to duty thresholds apply from 1 July 2019 and are available on our website.

For future years, we will publish a notice of the adjusted duty thresholds on the NSW legislation

website before 1 July each year.

When aggregating transactions that occur within 12 months of each other, the CPI for Sydney as at

the earliest transaction date should be applied.

Extension of surcharge purchaser duty exemption to other visa classes

Currently, an exemption from surcharge purchaser duty applies to permanent residents who intend

to use and occupy the land concerned as their principal place of residence for at least 200 days

during the following 12 months (also known as the principal place of residence exemption).

Changes introduced in the 2019 State Budget have extended the principal place of residence

exemption to retirement visa holders who have the following visas:

The exemption also applies to any equivalent visa of a class or subclass determined by the Chief

Commissioner of State Revenue.

In order for the exemption to apply, the holder of the retirement visa must occupy the property for

200 days continuously within the first 12 months after the liability date. Generally, this is the date of

exchange of contracts.

Subclass 405 –

Investor Retirement

Subclass 410 –

Retirement

Example:

Lisa holds a retirement visa (subclass 410). She purchases a property in Cronulla, with

exchange of contracts taking place on 4 July 2019. Settlement is due to take place 6 weeks

later, on 15 August 2019. In order to receive the surcharge purchaser duty exemption, Lisa must

occupy the Cronulla property as her principal place of residence for a continuous period of 200

days before 4 July 2020 (meaning she must move into the property on or before 18 December

2019).


eDuties

Revenue NSW is working on the development of an online portal which enables duties customers to

lodge applications that must be processed with Revenue NSW. The portal will enable customers to

lodge all (previously paper-based) applications online.

This will help our customers by:

Reducing time and administration costs

Providing fast and efficient services

Single point of contact for submissions

Real time tracking as applications progress from assessment to completion

Reduction of paperwork

Customers need to be registered in order to commence lodging their applications online. To express

interest in registering for eDuties, customers should email [email protected] and

provide either of the following:

• If you are an EDR registered customer make sure your EDR registration details (ABN,

approval holder and entity name) are up to date.

• If you are not an EDR registered customer, please provide the name, phone number and

email of your organisation’s authorised representative (director, business owner, principal)

and your organisation’s ABN.

Addition of new EDR document types

Three additional document types have been added to the list of EDR approved documents.

• Variation of contract - under section 31 of the Duties Act 1997.

• Partitions (equal or with one excess only) - under section 30 of the Duties Act 1997.

• Superannuation trusts (custodian/bare trust deeds) – under section 62B of the Duties Act

1997.

For more information about changes as a result of the 2019 State Budget, please

refer to the: State Revenue and Other Legislation Amendment Bill 2019.



Recent cases

Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34

Issue

Concession for primary producers.

Background

In 2013, Adams Bidco Pty Ltd (“Bidco”) and Mr Bob Ingham entered into an agreement to transfer all issued shares in Ingham Enterprises Pty Ltd (“Ingham”). If, at the time of acquisition of the shares, Ingham was a “primary producer”, the transfer would be exempt from landholder duty. In order for the concession under section 163D(1) of the Duties Act 1997 (“the Act”) to apply, Bidco would have to show that Ingham was a “primary producer” but was not “land rich.” The definition of primary producer is stated in section 163(2) of the Act. The key point of contention between the parties was the correct approach to determining whether a landholder’s land holdings “wholly or predominantly comprise land used for primary production”. The matter was previously heard in court, which ruled in favour of Bidco. The decision stated that Bidco was entitled to the exemption from landholder duty, following a review of the scope and operation of Ingham’s business, including evidence of the area and value of land used for primary production. The Chief Commissioner appealed this decision and submitted that the primary judge should have held the land holdings of Ingham in all places did not wholly or predominantly comprise land used for primary production (as defined in the Act). This was on the basis that Ingham’s land holdings actually used for primary production, measured by value, comprised no more than 35% of its land holdings in all places.

Decision The Court allowed the appeal unanimously, holding that Ingham’s land holdings in all places did not “wholly or predominantly comprise land used for primary production”. The majority of judges preferred a qualitative or evaluative approach which took into account value of the land not used for primary production, the significant minority of land by area not used for primary production, the underlying character of Ingham’s business, its sources of revenue and areas of expenditure. The court determined that the orders of the primary judge be set aside.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5c745d28e4b0196eea404a61

https://www.caselaw.nsw.gov.au/decision/5c745d28e4b0196eea404a61


Winston-Smith v Chief Commissioner of State Revenue [2019] NSWCA 75

Issue

Landholder duty.

Background

The appellant (“Winston-Smith”) sought review of a landholder duty assessment issued by the Chief Commissioner. The duty was paid in relation to their acquisition of shares in Macs Pty Ltd (“Macs”) from Town and Country Land Pty Ltd (“TCL”) on 30 November 2015. The appellant contended that the “not just and reasonable” landholder duty exemption contained in section 163H(1) of the Act should be available to exempt the acquisition. The appellant submitted that the exemption should be available in circumstances where there was no intent to avoid duty, and where the acquisition had no practical impact on the way the land owned by Macs was held. This submission was based on the appellant’s argument that he always maintained control over the land held by Macs - previously they held an indirect interest through TCL (intermediary company), and after acquisition of the shares held by TCL they held a direct interest.

Decision The court found that the acquisition produced a change in the appellant’s underlying practical and economic interest in the relevant land. The key reason for this finding was that the appellant’s existing 50% indirect interest held through TCL would have come to an end as a consequence of TCL being wound up. By making the acquisition in TCL, the appellant ensured they would retain a 100% practical and economic interest in Mac’s land. The court ordered that the appeal should be dismissed.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5caa756be4b02a5a800bfe74

https://www.caselaw.nsw.gov.au/decision/5caa756be4b02a5a800bfe74


Wykrota v Chief Commissioner of State Revenue [2019] NSWCATAD 106

Issue

Real purchaser.

Background

In 2013, the applicant entered into an oral agreement with the purchaser regarding the purchase, sub-division and development of the property. The property was bought in the name of the purchaser who paid the 10% deposit, and the remaining 90% was provided by a combination of a mortgage (by the applicant’s wife) and other funds. A deed of release was entered into between applicant and purchaser which stated that the purchaser was a one third owner of the property and that the applicant agreed (in 2014) that the applicant would buy out this interest for $172,000. When this transfer occurred, the applicant applied for a concession from duty under section 55 of the Act. The Chief Commissioner did not approve the application for concession and issued a notice of assessment for ad valorem duty. The applicant claimed the purchaser never owned any interest in the property and was only put on title as a trustee for the applicant (the ‘real purchaser’). The applicant submitted that, on the balance of probabilities, all of the purchase money was provided by the applicant, not the purchaser. The Chief Commissioner did not allow the application for the concession because the evidence suggested that the property was purchased with the intention of a commercial arrangement between the applicant and purchaser, and that the documentary evidence provided by the applicant did not prove that the applicant provided all of the money for the purchase and improvements to the property.

Decision The tribunal found that the duties notice of assessment issued by the Chief Commissioner was affirmed on the basis that the applicant did not satisfy the section 55 concession.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5cf5b0b2e4b02a5a800c13de

https://www.caselaw.nsw.gov.au/decision/5cf5b0b2e4b02a5a800c13de


Chrissie Group Pty Ltd ATF All Angels Family Trust v Chief Commissioner of State

Revenue [2018] NSWCATAD 77

Issue

Transfer not in conformity.

Background

On 25 July 2016, Chrissie Group Pty Ltd (“Chrissie”) was incorporated with Mrs Akkari as the sole shareholder, director and secretary. On 26 July 2016, the All Angels Family Trust was settled, with the applicant as trustee. On 24 August 2016, Mrs Akkari entered into an agreement to purchase a property in Goulburn, and ad valorem duty was paid. An undated transfer form was executed in respect of the purchase, with Chrissie listed as the transferee. The Tribunal found that Chrissie took the transfer as trustee of a discretionary trust. The Chief Commissioner assessed the transfer for ad valorem duty, on the basis that it was not in conformity with the initial agreement. The key issue in this matter was whether the transfer was eligible for the concession under section 18(3) of the Act. Under this section, the purchaser under the agreement and transferee under the transfer should be ‘related persons’ (as defined in the Act) at the time the agreement was entered into, and at completion of the agreement. The applicant stated that Mrs Akkari and Chrissie are related persons according to part (c) of the definition in the dictionary to the Act. This states that a related person can be a natural person and a private company if the natural person is a majority shareholder or director of the company. The Chief Commissioner submitted that the definition of ‘related person’ must be read in context, and therefore look at the capacity in which persons are operating under the agreement and under the transfer. The Chief Commissioner stated that the relevant item in the definition of ‘related person’ is item (d), not (c) (because (d) relates specifically to trustee situations); and the applicant’s interpretation of the definition leaves the section 18(3) concession open to abuse.

Decision The tribunal accepted the Chief Commissioner’s approach and found that Chrissie and Mrs Akkari were not to be treated as “related persons” because they did not satisfy the more specific paragraph of the definition (being paragraph (d)).

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5ac6af83e4b074a7c6e1ded4

https://www.caselaw.nsw.gov.au/decision/5ac6af83e4b074a7c6e1ded4


Common mistakes

Deceased estates – when to apply section 63(2)

Section 63 of the Duties Act 1997 provides for concessions from duty on the transfer of dutiable

property where the requirements of the section are satisfied.

A concession under section 63(2) exists relating to transfers of estate property as agreed between

beneficiaries. These agreements are usually in writing and commonly referred to as a Deed of

Family Arrangement. The result is a transfer of dutiable property by the legal personal

representative of the deceased to one of the beneficiaries in accordance with the agreement rather

than the will.

Under section 63(2) the transferee is only paying duty on the dutiable value of the property they are

receiving that exceeds the amount they were entitled to receive under the will.

Example:

Mark passed away on 1 September 2017. His legal representative (executor), informed his two

children (Peter and Phillip) that their father had declared them as equal beneficiaries of his

estate. His estate comprises the family home valued at $400,000, and the holiday home valued

at $500,000. Peter and Phillip entered into a deed of family arrangement. This states that the

family home is to be transferred to Peter, and the holiday home is to be transferred to Phillip.

Under the will, Peter and Phillip are each entitled to half the family home and half the holiday

home. Because of the deed of family arrangement, they are no longer going to be joint owners of

the family home and the holiday home. Section 63(1)(a)(iii) does not apply as Peter and Phillip

are not receiving what they were each entitled to under the will (ie [$400,000 + $500,000] ÷ 2 =

$450,000). Peter is acquiring a $400,000 home, while Phillip is acquiring a $500,000 home.

The transfer of the family home ($400,000) to Peter is assessed as follows:

• Peter is entitled to receive half of this property. The dutiable value is to be reduced by

Peter’s entitlement under the will ($400,000 - $200,000).

• Therefore, Peter is liable to pay duty on $200,000, which is the share of the property over

and above his entitlement under the will.

The transfer of the holiday home ($500,000) to Phillip is assessed as follows:

• Phillip is entitled to receive half of this property. The dutiable value is to be reduced by

Phillips entitlement under the will ($500,000 - $250,000).

• Therefore, Phillip is liable to pay duty on $250,000, which is the share of the property

over and above his entitlement under the will.


Evidentiary requirements for section 55

When applying for a concession under section 55 of the Duties Act 1997 (property vested in an

apparent purchaser), all evidentiary requirements are typically not provided.

The below evidentiary requirements must be provided when documents are lodged for assessment

of duty under section 55:

1. Original executed declaration of trust or transfer document.

2. A statutory declaration by the trustee stating:

a. the intention of the parties regarding the beneficial ownership of the trust property at

the time of purchase by the trustee and why the property was purchased in the name

of the apparent purchaser,

b. the age of the beneficiary or beneficiaries or, if the beneficiary is a company, the date

of its incorporation, and

c. who actually provided the purchase money for the trust property, including the

deposit, payable under the contract for sale.

3. Where it is claimed that the beneficiary actually provided the purchase money for the trust

property, documentary evidence is required. This may consist of bank statements,

passbooks and copies of cheques etc. If any part of the purchase money was borrowed,

details of the loan arrangements should be provided.

4. A copy of the agreement for sale of land for the purchase of the trust property.

5. A fully completed and witnessed Purchaser/Transferee Declaration.

For more information about section 55 transactions, refer to revenue ruling

DUT 030.

https://www.revenue.nsw.gov.au/help-centre/resources-library/oda076i.pdf

https://www.revenue.nsw.gov.au/help-centre/resources-library/dut030


Errors made by EDR clients

Compliance action is taken on assessments made through authorised EDR clients, as well as

transactions that are assessed by agents. Reviews of recent compliance documents have highlighted

the following errors:

• Required application forms not being completed in full, and data from the forms not being

entered correctly

• Incorrect data entry in the EDR systems such as: execution dates, customer names and dates

of birth

• Notice Of Sale data not matching assessment data

• Transactions not being aggregated (resulting in a reassessment with interest/penalties)

• Section 18(3) not being applied correctly and insufficient declarations being made

• Using the incorrect transaction in the EDR system, leading to an incorrect exemption or

concession

• Insufficient evidence being kept (not complying with evidentiary and client identification

requirements)

• EDR approved clients failing to comply with obligations under the Directions of EDR use

(including providing required records for audit)

• EDR clients not updating their contact details with Revenue NSW

Revenue NSW is here to support our EDR approved clients with their obligations. If you would like

help or clarification relating to EDR, please contact our EDR Support Team on 1300 308 863.

Exemption for Australian Based Developers

An exemption from surcharge duty is available for Australian Based Developers who are foreign

persons, if certain criteria are met. The exemption may apply where Revenue NSW is satisfied that

the land in question will be used for:

• Construction and sale of new homes, or

• Subdivision and sale for new home construction

In order for the exemption to apply the completion of the sale (of the constructed home or subdivided

land) must be completed within 10 years of the acquisition of the land. Time limitations also apply in

regards to applying for the exemptions.

It is important to remember that duties and land tax liabilities arise differently and that separate

applications need to be lodged for both the duties surcharge exemption and the land tax surcharge

exemption. These cannot be done via EDR and must be lodged directly with Revenue NSW.


First Home Benefits

What are first home benefits?

There are currently two types of benefits which may be available for first home buyers in NSW. The

first home buyer’s assistance scheme, which is an exemption or concession on transfer duty, and

the first home owner grant (new homes) scheme, which is a grant paid to first home buyers.

First home buyers assistance scheme

The first home buyer’s assistance scheme (FHBAS) provides an exemption or concession from duty

for eligible applicants buying their first home (or vacant land on which to build their first home) on or

after 1 July 2017.

To qualify for an exemption or concession under the FHBAS, the dutiable value of the transaction

must fall within certain thresholds. The dutiable value of the property is determined as at the date

the agreement or transfer was first executed.

The threshold values are summarised in the table below:

A FHBAS calculator is available on the Revenue NSW website to help calculate the exact amount of

duty payable on transactions eligible under the scheme.

Residence requirement

In order for first home buyers to be eligible for the FHBAS, at least one applicant must meet the

residence requirement.

Type of Property Dutiable Value Range Exemption or Concession

New and Existing Homes Up to $650,000 Exemption

$650,001 - $800,000 Concession

Vacant Residential Land Up to $350,000 Exemption

$350,001 - $450,000 Concession

The applicant must commence living in the property within 12

months of the completion of the transaction and must live in the

property for a minimum period of six months. ‘Completion’ of the

transaction is generally taken as the date from which the applicants

become the registered owners of the property.

https://www.apps08.osr.nsw.gov.au/erevenue/calculators/fhba.php


Shared equity arrangements

Under the FHBAS, when more than one person is acquiring a property, a first home buyer may still

be eligible for assistance for a percentage of the purchase price, even if other applicants are not.

This is known as a shared equity arrangement.

To qualify, the first home buyer must acquire at least a 50% interest in the property and the

ineligible purchaser on the agreement or transfer must not be the first home buyers’ spouse.

To receive this exemption or concession, certain eligibility criteria must be met. To view information

about the eligibility criteria for the FHBAS, see our website.

First home owner grant (new homes) scheme

The First Home Owner Grant (FHOG) provides assistance in the form of a one-off payment of

$10,000 to eligible applicants when buying or building a new home. The FHOG differs from the

FHBAS which provides exemptions or concessions on transfer duty for first home owners. As the

two schemes have different requirements, a first home owner may be eligible for both the FHBAS

and the FHOG, or just one, depending on the circumstances.

For more information on special concessions for shared equity

arrangements, refer to section 78B of the Duties Act 1997.


There are two types of grants available under the FHOG scheme. They are:

• A first home builders grant – which is available for the construction of a new home under a

comprehensive building contract or as an owner builder.

• A first home purchasers grant – which is available for the purchase of a new home and land

under one agreement or transfer or any other eligible transaction.

There are different eligibility caps depending on the type of grant.

To receive the grant, certain eligibility criteria must be met. To view information

about the eligibility criteria for the first home owner grants, see our website.

Example 1:

Tom is a first home buyer. He purchases an older property for $480,000 which he plans to

renovate and move into. As the property is not new, he is not eligible for the FHOG so he will not

receive the $10,000 grant. However he is eligible for the FHBAS and will receive a full exemption

from transfer duty (as the purchase price is below $650,000). Tom must ensure that he

completes his renovations and moves into the property within 12 months of the settlement date.

Example 2:

Sarah is a first home buyer. She purchases a house and land package for $560,000. As the

property is brand new and below the FHOG cap of $600,000 for new home purchases, Sarah is

eligible for the $10,000 grant. As the property is below the FHBAS threshold of $650,000, she is

also eligible for a full exemption of transfer duty.

http://www.revenue.nsw.gov.au/grants/fhog


Common mistakes

Which value to use when applying for a First Home Builder’s Grant

When assessing an application for the FHOG in a case where an applicant is building their home,

Revenue NSW will look at the value of the land as at the building contract execution date – not the

date on which the vacant land was initially purchased.

For example, if an applicant purchased a vacant block of land in December 2015, and only signed a

building contract to build on that land in December 2019, Revenue NSW would look at the value of

the land as at December 2019.

Misunderstandings around the residence requirement

The residence requirements for both the FHBAS and FHOG state that at least one applicant must

reside in the home as their principal place of residence for a continuous period of at least six months

commencing within 12 months of the completion of the eligible transaction.

This is a strict requirement for both schemes and if not met, may result in the applicant having to pay

back any benefits received along with any interest and/or penalties.

A common misconception among applicants is that they don’t necessarily need to reside in the

property, as long as the property isn’t rented. This is not true. The applicant must make the property

their principal place of residence – meaning they must reside in the property, for a minimum period

of 6 months. Merely connecting utilities and having the property available for your use does not make

the property your principal place of residence. Revenue NSW has a robust compliance program in

place to ensure that recipients of the grant meet the residence requirement. Where applicants fail to

do so, and don’t inform our office within the required timeframe, they will be required to repay the

benefits along with interest and/or penalties.

There are some circumstances where an applicant may not be required to comply with the residence

requirement, such as:

• If they are a member of the Australian Defence Force and are enrolled to vote on the NSW

electoral roll,

• If circumstances outside their control affect their ability to fulfil the residence requirement. If

this occurs, they may lodge an application with Revenue NSW outlining their circumstances.

We may:

o Approve a period in excess of the 12 months after completion of the transaction for an

applicant to occupy the home, or

o Approve the occupation of the home as a principal place of residence for a period less

than 6 months, or

o Exempt an applicant from the residence requirement.


It is very important to remember that any such request must be lodged with Revenue NSW as soon

as possible, but no later than 12 months after completion of the eligible transaction.

Late lodgement of grant application

Legislation requires that applicants apply for the FHOG within 12 months of completion of the eligible

transaction. For purchases of new homes, this is 12 months from the settlement date. Where a new

home is being built, this is 12 months from the date when the home is ready for occupation as a place

of residence. If an applicant is deemed eligible for the grant, the grant is paid in anticipation of the

residence requirement being met.

Some applicants mistakenly believe that they must first fulfil the residence requirement before they

can apply for the grant. This is not correct. The grant is paid in advance, with the applicant making a

declaration that they will fulfil the residence requirement. It is very important to lodge an application

for the grant within the required timeframe as failure to do so can mean that the applicant may miss

out on getting the grant.

If an applicant is borrowing money from a bank or financial institution for the purchase of their home,

they may lodge their application through the bank/financial institution and the funds will be paid to

them at settlement. For applicants not obtaining finance, they may lodge an application directly with

Revenue NSW once settlement has taken place.

Granny flats

Granny flats or secondary dwellings have increased in popularity in recent years as an affordable

housing option. The question often arises as to whether the FHBAS and or FHOG can be claimed

where there is a granny flat in question. Here we answer a few common questions:

Question: I am building a granny flat on my parents’ property. Can I claim the FHOG for the granny

flat?

Answer: Yes. The contract to build the granny flat is an eligible transaction. Provided the eligibility criteria and residence requirement are met, you can claim the FHOG for the granny flat.

Question: How about if my parents subdivide their property, I purchase the newly created vacant battle-axe block from them and build a granny flat on it? Can I claim the FHOG and FHBAS on this?

Answer: Yes. In this instance, you are purchasing a vacant parcel of land and building a brand new home. Provided you meet the eligibility criteria and value caps/thresholds you may be entitled to claim both the FHBAS and FHOG.

Question: I am purchasing a brand new home and claiming both FHBAS and FHOG for it, however the home also has a granny flat on it which I want to rent out. Will this affect my eligibility?

Answer: No. Provided you meet the residence requirement, it does not matter if you rent out a portion of the property. You can live in the main property and rent out the granny flat, or you can live in the granny flat and rent out the main property. Make sure you keep evidence of each in case you are audited by Revenue NSW.


Land Tax

What is land tax?

Land tax is an annual tax on property owned as at midnight 31 December of each year. Land owned

on this date determines liability for the next tax year. For example, land owned as at midnight 31

December 2018 determines liability for the 2019 land tax year. There is no pro rata or

apportionment for land tax for property that is sold during the year. Land tax may apply to property

regardless of whether or not it generates an income.

Who needs to pay land tax?

Land tax may be payable by any person who owns land in NSW. This may be a natural person, a

company or a trust. Ownership includes both legal and equitable, along with any deemed interest in

land, such as a Crown lease.

Which land is subject to land tax?

The term “land” includes all types of land parcels registered with NSW Land Registry Services

(LRS).

These include:

✓ Deposited Plans e.g. houses or vacant land

✓ Strata Plans e.g. units/apartments, villas, townhouses

✓ Notional parcels e.g. company title units or Crown land

Taxable Land

• Residential, commercial or

industrial properties, including

car spaces, factories, shops and

warehouses

• Vacant land, including vacant

rural land

• Investment properties or

holiday homes

• Company title units

• Land leased from state or

local government

1 2

3

4

1

5


Foreign persons

(residential land only)

Land values

Land values are determined by the Valuer General as at 1 July each year. Land tax is generally

charged on the average value of land (that is, the average of the current year’s land value and the

land values for the previous two years).

2019 land tax rates and thresholds

The following table illustrates the land tax thresholds and rates that apply for the 2019 tax year.

Land Value Rate

$1 - $692,000 NIL

$692,001 - $4,231,000 $100 + 1.6%

$4,231,001 and over $56,724 + 2%

Land tax exemptions

There are a number of exemptions and concessions from land tax, including:

Land Value Rate

$1 - $4,231,000 1.6%

$4,231,000 and over $67,696 + 2%

Land Value Rate

$1 and over 2.0% (in addition to any land tax payable)

✓ Principal Place of Residence (PPR) ✓ Aged Care Facilities / Nursing Homes

✓ Primary Production Land (PPL) ✓ Retirement Villages

✓ Boarding Houses ✓ Child Care Centres

✓ Low Cost Accommodation ✓ Charities / non-profit organisations

Individuals, partnerships,

companies* and fixed trusts

Special trusts

*grouped companies are only entitled to one threshold per group


Surcharge land tax

Foreign persons who own residential land in NSW must pay a surcharge land tax of 2 per cent. The

surcharge is in addition to any land tax payable on the property. Surcharge land tax applies to the

portion owned by the foreign person.

There is no tax-free threshold applicable to surcharge land tax, therefore a foreign person may be

liable to pay surcharge even if they do not pay land tax.

There is also no PPR exemption from surcharge for foreign persons meaning surcharge land tax

may be payable on their PPR even if it is exempt from land tax.

There is however a PPR exemption for permanent residents who meet the residence requirement.

Example

Tina and Joe are foreign persons. In November 2018 they purchase a unit in NSW with a

taxable land value of $550,000. They occupy the property as their PPR. They are exempt from

land tax as the property is their PPR. However, as they are foreign persons, they are not

exempt from surcharge land tax.

Their surcharge payable for 2019 is $11,000 ($550,000 x 2%).

Example

Ken is a permanent resident who has owned and resided in his Sydney property for 16 years. In

February 2018 he travelled to New Zealand to spend time with relatives and did not return to

Australia until July 2019. His Sydney property was vacant during this time, with his brother

checking it from time to time. For the 2020 land tax year, Ken is a “foreign person” as he did not

meet the 200 day test (i.e he was not in Australia for 200 days in the 2019 calendar year) and

therefore he may be liable for surcharge land tax on his Sydney property. However, as a

permanent resident, he can claim the PPR exemption for the property provided he resides in the

property for 200 days in the 2020 tax year. Ken will need to register for land tax and claim the

PPR exemption.


What’s new

Surcharge exemption for retirement visa holders

Currently, an exemption from surcharge land tax applies to permanent residents who intend to use

and occupy the land concerned as their PPR for at least 200 days in the current calendar year.

Changes introduced in the 2019 State Budget have extended this exemption to retirement visa

holders who have the following visas:

The newly introduced section 5BA of the Land Tax Act 1956 extends the exemption under section 5B

to retirement visa holders. It also grants an additional benefit to retirement visa holders in that they

can claim the exemption if they have used and occupied the land in question as their PPR in the

previous calendar year.

Please note that retirement visa changes are only in relation to the PPR exemption for surcharge. As

retirement visas do not meet the “ordinarily resident” test they will still be liable for surcharge land tax

on any other residential property they own in NSW.

Email notifications for land tax assessments

This year for the first time Revenue NSW has offered customers the option to receive electronic

notifications instead of a paper assessment. There will be no sensitive information sent via email,

customers will receive an email advising them when their assessment is ready to view online. From

there, they simply log into land tax online services and can view, download and print copies of their

assessments for the past five years. To opt in for email notifications, go to our website, log in to land

tax online services and follow the prompts.

Subclass 405 –

Investor Retirement

Subclass 410 –

Retirement


New website layout

Our website has a new layout to make it easier for customers to navigate.

The new website offers the following functionalities:

• All submissions (eg requests for exemptions) can now be made online.

• Bpay details have now been added to Clearance Quotes and Settlement Letters.

• Electronic delivery of notifications for land tax customers who have ‘opted in’;

• Explanations and sample calculations are now embedded.

• The simplified layout allows easy access to online services such as calculators, payment

portals, subscriptions, seminars and videos.


Request an extended instalment plan online

Did you know that you can request an extended instalment arrangement to pay your land tax

online? If you are having difficulty in paying your land tax assessment by the due date you may be

able to request an extended instalment arrangement. Eligibility criteria apply.

Remember, if you are unable to obtain an extended instalment plan online you

can contact us on 1300 368 710 to discuss your options.


Recent cases

McCabe v Chief Commissioner of State Revenue [2019] NSWCATOD 33

Issue

Exemption for Primary Production Land

Background

The applicant owned rural land on which he received Principal Place of Residence and Primary Production Land exemptions for over 40 years. In 2016, part of the land was sold severing any connection between the assessed land and his residence. Following the sale, the Chief Commissioner determined that the assessed land was unused and issued land tax assessments for the 2017 and 2018 land tax years. The applicant could not demonstrate that primary production was the dominant use of the land and admitted that no cattle grazed there as it was unfenced, bordered by a road and without the infrastructure needed to graze cattle. McCabe believed that as the land was being used to cultivate kikuyu grass for future grazing, its dominant use remained primary production.

Decision The Tribunal held that:

• The dominant use of land was not for the maintenance of animals for the purpose of

selling them or their natural increase.

• The actual use of the land cannot be determined by the intentions of the owner.

• Preparing land for primary production does not constitute use of the land for primary

production.

• The land tax assessments for 2017 and 2018 land tax years were correct.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5c6f233de4b02a5a800beb3b

https://www.caselaw.nsw.gov.au/decision/5c6f233de4b02a5a800beb3b


Fanous v Chief Commissioner of State Revenue [2019] NSWCATAD 64

Issue

Special Trust or Fixed Trust

Background

Thomas Fanous as trustee for the Thomas Fanous Unit Trust, purchased land in 2015 and submitted trust deeds for land tax assessment. As the deeds were for a special trust, land tax assessments for 2016 and 2017 were issued with no tax-free threshold. The applicant subsequently provided another trust deed declaring the incorrect deed was originally presented. The new deed was stamped on 9 May 2017 but had the same commencement date as the original. A reassessment was requested for 2016 and 2017 but was refused by the Commissioner.

Decision The tribunal held that:

• Although the 2017 Trust Deed had a commencement date of 7 July 2015, it did not

become operative for land tax purposes until it was stamped on 9 May 2017.

• A retrospective application of the 2017 Trust Deed would be inconsistent with the

provisions of the Land Tax Management Act 1956 and the Taxation Administration Act

1996 and therefore was not allowed.

• The land tax assessments for the 2016 and 2017 land tax years were confirmed.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5cb51783e4b0196eea40607e


Lou v Chief Commissioner of State Revenue [2019] NSWCATOD 9

Issue

Principal Place of Residence exemption

Background

In 2007 Ms Lou bought a property in Empire Bay on the Central Coast. Claiming to commute from the property to Sydney for work, Ms Lou applied for the Principal Place of Residence exemption for the 2011 and 2012 land tax years. This was disallowed by the Chief Commissioner because of a lack of evidence to support her claim. The applicant then sought a review of the decision.

Decision The tribunal noted the failure to provide:

• statements from relevant former employers confirming her address during this time;

• statements from neighbours confirming her presence at the land during this time;

• statements from housemates confirming her residence during this time; nor

• any explanation as to why she provided no such statements.

The tribunal held that:

• The bills provided did not prove she was using the land as her principal place of

residence.

• The applicant’s income tax returns prepared by her accountant for the financial years

2010-2013 showed her father’s home in Forest Lodge as her “home address”.

• Land tax was not exempt for any of those years and the decision of the Chief

Commissioner was affirmed.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5c329424e4b0b9ab40212c7b


Common mistakes

Permanent residents and surcharge land tax

We are receiving increased numbers of objections from permanent residents who are being charged

surcharge land tax as a result of being away from Australia for long periods of time. It is important to

remember that in order to not be considered a “foreign person” for land tax purposes an individual

must:

1. Not have a time limitation on their presence in Australia

2. Be present in Australia for at least 200 days in the previous tax year

As land tax is an annual tax, these requirements must be met as at midnight 31 December each year.

Any permanent resident that is away from Australia for more than 165 days in any given calendar is

considered a foreign person for the following tax year. This means that they will become liable for

surcharge land tax on any residential property they own in NSW (including their PPR).

When rural land is rezoned

In recent years many local councils have made changes to land zonings. Owners of rural land which

is used for primary production are at risk of losing their land tax exemption if their land is rezoned to

residential. This is because there is a much stricter test applied to residential zoned land than there

is for rural land, in order for a primary production land (PPL) exemption to apply.

For land which is zoned rural, a PPL exemption can be claimed where the dominant use of the land

is primary production (a definition of ‘primary production’ can be found in section 10AA of the Land

Tax Management Act 1956). For land which is zoned residential however, not only does the land need

to be dominantly used for primary production, the primary production use must also:

1. Have a significant and substantial commercial purpose or character, and

2. Be engaged in for the purpose of profit, on a continuous or repetitive basis (whether or not a

profit is actually made).

Example

Lucy and Greg are permanent residents. They own two properties in Sydney – their PPR and an

investment property. In March 2019 Greg takes a contract role in the UK for 12 months. He is

away from Australia for 280 days in the 2019 calendar year (meaning he is only present for 85

days). As he does not meet the ‘ordinarily resident’ test in 2019 he is considered a foreign person

for 2020. This means Greg will become liable for surcharge land tax on his share of both his PPR

and his investment property for 2020. If Greg returns to Australia in March 2020 and continues to

reside in his PPR for a minimum of 200 days continuously, he may claim an exemption from

surcharge on his PPR (his investment property will still be liable for surcharge).

Revenue NSW does not have discretion to waive or vary either of the requirements under the

‘ordinarily resident’ test.


These added requirements mean that for many small scale primary producers they are no longer

eligible for the PPL exemption. Compounded with the increased value of the land due to the

rezonings, this can add significant holding costs for the owner of the land.

Owners who are having their land rezoned should contact Revenue NSW as early as possible to see

if they are eligible for an exemption, and seek independent financial advice where needed.

Granny flats, Air bnb, partially rented property

A common question we receive is around PPRs which are partly rented out. This can include a variety

of scenarios, such as:

• Renting a granny flat on the land to tenants

• Renting a room or rooms in the house to boarders

• Renting the property as holiday/temporary accommodation while the owner is away

Generally speaking, if an owner rents out part of their PPR it will still be exempt from land tax as long

as the rented part of the property is:

• One room

• One suite of rooms

• One flat

• One suite of rooms and one room

• One flat and one room, or

• Two rooms, occupied by two different tenants

If more of the owner’s PPR is rented, then a partial exemption may apply. If an owner rents out the

entire property whilst they are away, they may be able to claim the exemption for ‘absence from

former residence’ provided the property is not leased for more than 6 months in any calendar year.

The owner must have lived in the property for at least 6 months prior to their absence and they

cannot live in another property which they own while they are away.

Joint ownership and secondary deductions

There is often confusion around joint ownership of land and how secondary deductions apply. If you

own land with one or more other owners, you are a joint owner of land. Joint owners may be any

combination of owners, either as joint tenants or tenants in common, and can include individuals,

companies or trusts. If you own land together with another owner/s you must register this joint

ownership for land tax.

You will be jointly assessed and liable for any land tax payable on the land which you jointly own.

This joint ownership is called the primary account. If you own any other land, either in your own right

or together with another owner, you must also register for land tax as an individual. In your

individual registration you must declare all interests you have in land in NSW. This individual

ownership is called the secondary account.


How joint owners are assessed (2019)

Each unique combination of joint owners will be assessed as a separate primary account.

Each individual will be assessed separately as a secondary account.

$1,000,000

$450,000

$800,000

Secondary

$225,000

$1,125,000

Primary 50% each

Tax: $1,828

Primary 50% each

Tax: $ - -

Primary 50% each

Tax: $5,028

Example

Andrew owns three properties in NSW – each with a different person. He therefore has three

primary accounts, each which he must register for land tax. As he owns properties in multiple

partnerships he must also register himself as an individual (even though he does not own any

property in his own right). Andrew will receive a land tax assessment for his secondary

account, in which he will be taxed on his combined interests in each of the three properties.

But wouldn’t that mean he is being taxed twice?

Andrew will likely receive a secondary deduction in his individual assessment. Secondary

deductions are designed to eliminate double taxation by providing an owner in their secondary

account with a deduction which relates to their interest in the jointly owned land.


What to do if you receive an incorrect assessment: objection or variation?

Customers often get confused about whether to lodge a variation or an objection. If you receive an

incorrect land tax assessment (for example your assessment includes land which you sold in the

previous year and you hadn’t notified us of the sale) the first step you should take is to call us or

lodge a variation return online. Online variation returns are generally quick and straightforward and

can be done any time.

To lodge a variation return, go to our website and login using the Client ID and correspondence ID

on your assessment. You then follow the prompts to request the necessary changes and submit

your request. You can also upload documents and track your request online. Once we have

processed your variation return, we will either send you an amended assessment or notify you of

the outcome.

An alternative is lodging an objection, however, this is a longer and more formal process. An

example of when you may wish to lodge an objection is when you have lodged a variation return

and are dissatisfied with the outcome.

Unhappy with

assessment

Lodge a

variation

return online

Unhappy with

the outcome

Lodge an

objection

Apply to NSW

Civil and

Administrative

Tribunal /

Supreme Court

Within 40 days

of assessment

Within 60 days

of assessment

Within 60 days

of decision

Still unhappy Still unhappy


Parking Space Levy

Did you know that you may have to pay an annual levy if you own a parking space in

Sydney?

The parking space levy was introduced in 1992 to reduce traffic congestion by discouraging car use

in key Sydney business districts.

For the 2019/2020 financial year, the levy applies to residential and non-residential off-street

parking spaces in the following leviable districts:

Category District Rate per parking space

1 City of Sydney

$2,490 North Sydney

2

Bondi Junction

$880 Chatswood

Parramatta

St Leonards

Owners of parking spaces as at 1 July in each year must lodge an annual return with Revenue

NSW by 1 September of that year.

For more information, please visit our website or Transport NSW.


Small Business Exemption

Certain types of general insurance are now exempt from duty provided the insured person is a capital gains tax (CGT) small business. You are considered a CGT small business entity if you:

• carry on a business, and • have an aggregated turnover of less than $2 million for the income year in which the

insurance is effected or renewed.

The insurer is usually liable to pay the duty which may be passed on to the insured person. If the insured person is a CGT small business, an exemption will apply to:

• commercial vehicle insurance, • commercial aviation insurance, • occupational indemnity insurance, and • product and public liability insurance.

If the insured person is a CGT small business, duty on these types of insurance will not be charged. It is important to note you still may be required to pay duty on other types of insurance contained in your policy.

To claim the exemption, you need to provide a declaration to your insurer in an approved form. Contact your insurer for further details.

For more information, please visit our website.

1 2

3 4


Payroll Tax

What is payroll tax?

Overview

Payroll tax is a state tax paid by employers, on wages over the payroll tax threshold. An employer

must register when during a month they pay wages greater than the weekly threshold amount. For

the purposes of the Payroll Tax Act 2007, wages are taxable if they are paid or payable by an

employer for, or in relation to, services performed by an employee in NSW.

The threshold rate for 2018-19 is $850,000 (increasing to $900,000 for 2019-20) and the tax rate is

5.45 per cent. A NSW employer is entitled to claim one threshold per group only and the threshold

will be applied on a pro rata basis for businesses that did not trade for the whole financial year. In

addition, if an employer engages employees in multiple Australian jurisdictions, the threshold

entitlement in NSW is reduced.

All employers must lodge an annual reconciliation, which must be lodged and paid on or before the

28 July. If an employers’ annual tax payable exceeds $20,000, they must also lodge and pay a

monthly payroll tax return on the seventh day of every month. If the due date for either a monthly

lodgement or the annual reconciliation falls on a weekend or public holiday, lodgement and payment

must be made the next business day.

The jurisdiction where payroll tax is paid depends on whether the employee has worked ‘wholly in

NSW’ or ‘partly in NSW’. A liable wage paid to an employee will only be taxed in one jurisdiction in a

month to prevent double taxation. Where an employee has not wholly performed services in NSW in

the month, the nexus provisions provide a four-tiered test to determine the jurisdiction where payroll

tax should be paid. These are harmonised between all states and territories.

Wages

Commonly referred to as “remuneration”, the general concept of wages encapsulates all

payments for services performed by an employee in NSW. Wages include:


All allowances granted to an employee are liable wages, however there can be exempt

components to certain amounts relating to motor vehicle and accommodation allowances. Any

amounts over the exempt components paid in relation to motor vehicles and accommodation

allowance need to be included in liable wages.

Independent contractor or employee?

Workers can be classified as either an independent contractor or an employee. An employee

engaged under a contract of service is commonly referred to as an Employer/Employee

relationship. Payments to contractors for services provided are liable for payroll tax as deemed

wages, unless one of seven contractor exemptions can be met. If a contractor exemption is not met,

the contract is deemed a ‘relevant contract’. Remuneration paid for services under a relevant

contract are liable for payroll tax, excluding any GST component.

Employment agents

Employers use agencies to provide them with persons to perform labour services. An agency can

enter into different forms of contract but in essence there are only two types:

1. the employer (client) directly hires the worker as an employee or a contractor using the agency to find the worker. The client usually pays the worker directly and the agency receives a fee or an ongoing percentage. These contracts are not employment agency contracts. Revenue Ruling PTA029 recruitment/placement agencies clarifies this type of direct hire contract.

2. the client does not offer a direct hire relationship to the worker but the agency offers the work to the worker on behalf of their client as an on-hire arrangement.

Under an employment agency on-hire contract arrangement, a service provider can never be the

employee of the end user client. Businesses that procure or facilitate the services of a service

provider for an end user client are taken to be an employment agent.


Exemptions

Employer based exemptions include:

Employee based exemptions include:

Rebates

Grouping

Grouping provisions within the Payroll Tax Act 2007, state four ways in which a group can be

formed:

Compliance expectations

We regularly conduct audits to ensure that customers are paying the correct payroll tax and will

conduct an audit if you fail to register with us or have incorrectly stated your wages with third

parties. We select audits based on varying methods which include data mining, data matching,

random selection and tip-offs.

If you are selected for an audit, our auditors will investigate all necessary business records and

issue an assessment. Employers must keep the necessary records to determine their payroll tax

liability for five years from the date of a transaction or the date the record was first prepared or

obtained. Penalties and or interest are generally applied if there has been an underpayment of

payroll tax (tax shortfall). Customers that are dissatisfied with the assessment, decision or

determination may lodge an objection or an appeal.

✓ charitable, religious, benevolent institutions ✓ public and non-profit private hospitals

✓ non-profit, non-government schools ✓ local government (*with exceptions)

✓ Maternity, paternity and adoptions leave

✓ Volunteer fire-fighters and emergency service volunteers

✓ Defence personnel

✓ Apprentice and trainee wages ✓ Jobs Action Plan

Tracing of interests

in a corporation

Related corporations Common employees

Commonly controlled

businesses


What’s new

In the 2018 State Budget it was announced that the payroll tax threshold will increase up until the

2021-22 financial year.

Amendment of payroll tax threshold

“For the financial year commencing on 1 July 2019 the threshold increased to $900,000”

For the financial year commencing on 1 July 2020 the threshold will increase to $950,000.

For the financial year commencing on 1 July 2021 and subsequent financial years the threshold will be $1,000,000.

Motor vehicle allowance exempt component

The exempt component of the allowance is 68c/km.

Overnight accommodation allowance exempt component

The prescribed rate for 2019-20 is yet to be published. When it is available, the rate will be

posted on our website; please check www.revenue.nsw.gov.au

Amendment to annual reconciliation date

As of the 2018-19 annual reconciliation, the payroll tax annual reconciliation lodgement date has changed from 21 July to 28 July. If this date falls on a weekend or public holiday, lodgement is required the next business day.

Estimate monthly assessments

Where a business previously had an annual liability of less than $150,000 they can estimate a monthly liability based on their previous year’s liability with a 3 per cent uplift. In circumstances where businesses do not have a previous year’s liability, they must make three monthly returns based on actual wages paid before they can use the estimate method. The estimate method will not apply to annual reconciliations – actual figures must be used.



Recent cases

Southern Cross Group Services Pty Ltd v Chief Commissioner of State Revenue

[2019] NSWSC 666

Background

This appeal relates to the imposition of payroll tax for the 2010-11 and 2013-14 financial years against Southern Cross Group Services Pty Ltd (the first plaintiff) and Southern Cross Group NSW Pty Ltd (the second plaintiff). During these financial years, the plaintiffs operated a business as private security contractors. The first plaintiff entered into security contracts with clients for the provision of security services and personnel, and used employees and additional staff supplied by subcontractors to provide those services. The first plaintiff’s clients were property managers or operators of shopping centres and other facilities, as well as other security companies. From July 2012, the first plaintiff contracted with the second plaintiff for the second plaintiff to supply the additional staff, which it also did through subcontractors.

The issue in the appeal was whether the security contracts, and the contracts between the first and second plaintiffs, were “employment agency contracts” (within the meaning of section 37 of the Payroll Tax Act 2007). The plaintiffs submitted that they were not because the relevant contracts were not with the “end users” of the services provided (the plaintiffs argued that the “end user” was, for example, the owners and not the operators of Westfield shopping centres). The plaintiffs submitted that, where there is a chain of intermediaries between the service providers and the end user, there can only be one employment agent in the chain and that employment agent must be the closest entity to the end user.

Decision After considering the plaintiff’s submissions, the Court rejected their arguments. The Court also held that the service providers could be working in and for the conduct of more than one business at the same time i.e. where security staff were procured by the second plaintiff for the first plaintiff (and then provided to the first plaintiff’s clients), the security staff would be considered working in and for the conduct of the first plaintiff’s business and the client’s businesses.

The outcome of this decision ultimately means that where there is a “chain of on-hire” in relation to the employment agent’s provisions (Division 8 of Part 3 of the Payroll Tax Act 2007), all employment agents in the chain are liable for payroll tax unless that liability is excused under section 41 of the Payroll Tax Act 2007.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5cf74d5ee4b02a5a800c14e4


Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue;

International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019]

NSWSC 65

Background

In this matter, the plaintiffs provided cleaning services to the following categories of clients: hotels, aged care and retirement villages, commercial clients, a hospital, and a school. The plaintiffs submitted that where the services provided are ancillary to the client’s core business, the service providers are not working in and for the conduct of the client’s business.

Decision After considering the plaintiff’s submission, the Court rejected their argument. The Court held that, when looking at whether services providers are working in and for the conduct of client businesses, the more meaningful factors are: whether services are provided on-site, whether services are provided with a degree of continuity or regularity (as opposed to ad-hoc), and the extent of interaction and supervision with or by the client’s staff.

Link to Decision

https://www.caselaw.nsw.gov.au/decision/5cf6fd80e4b02a5a800c1464


Common mistakes

To help you meet your payroll tax obligations, below is a list of some common errors that are made when lodging payroll tax returns:

Calculating your liability on net wages

➢ remember that payroll tax is a tax on gross wages

Missing the lodgment deadline.

➢ failing to lodge returns on time may result in penalties and interest, so to avoid additional payment, ensure you lodge by the due dates

Incorrectly exempting wages

➢ be familiar with exempt wage components and entitlements including maternity/paternity/adoption leave, Commonwealth Paid Parental Leave and non-income taxable redundancy components of termination payments

Claiming Motor Vehicle and Accommodation Allowances without adequate records

➢ ensure you maintain records to support the exempt components

Incorrectly including the value of Fringe benefits:

➢ ensure you gross up the sum of the type 1 and type 2 aggregate amounts by the type 2 gross up figure (1.8868)

➢ remember to proportion fringe benefits to Australian wages, if the benefits relate to multiple jurisdictions

Failure to include employee salary sacrifice amounts

➢ ensure salary sacrifice amounts are included in liable wages or the applicable wage category

Excluding director payments

➢ third-party payments to directors that relate to services provided are considered liable wages irrespective of whether the payments are made to another company, a superannuation fund or a relative

Claiming contractors' exemptions incorrectly

➢ Ensure that your contractors are genuine contractors and not employees for payroll tax purposes. If a genuine contractor relationship exists, be aware of the various exemptions that apply and whether you can reduce your liability


Claiming Rebates for apprentices and trainees who are not approved by the Department of Industry (DOI)

Ensure you have documentation that supports the employee is registered with DOI

Claiming multiple thresholds

➢ Be aware of the grouping provisions to ensure that if you are considered a member of a group only one member receives the threshold.

Date post:	22-Jun-2020
Category:	Documents
Upload:	others
View:	4 times
Download:	0 times

State Revenue Update | Seminar Notes | July 2019 …...State Revenue Update | Seminar Notes | July...

Documents