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Change in beneficial ownership – Where are we now and which transactions are ‘in’ or ‘out’ of the duties net?

In our recent article ‘Revenue NSW Bill passed – Extending Duty on Trusts, Foreign Surcharges & Tax Integrity, we discussed the substantial amendments made to the Duties Act 1997 (NSW) (Act) in May 2022, including the charging of duty on a change in beneficial ownership of dutiable property. This new head of duty (in section 8(1)(b)(ix) of the Act) has the potential to apply to a wide range of transactions.

Since May 2022, there has been material released providing further clarity as to the types of transactions captured by the amendments, including:

  1. Duties Regulation 2022 (Regulations), published on 26 August 2022, add to the list of transactions in section 8(3) which are excluded from duty. The Regulations apply to transactions occurring from 19 May 2022.

  2. Commissioner's Practice Note (CPN) 027: Leases and Change in Beneficial Ownership, issued on 1 November 2022 and effective from 19 May 2022.

  3. CPN 025: Change in Beneficial Ownership, issued on 1 November 2022 and effective from 19 May 2022.

Now that we have more comprehensive guidance, we outline below which transactions are ‘in’ or ‘out’ of the duties net.


Unit Trusts and discretionary trusts

We reported in our previous article, the new provisions would affect a change in entitlements for beneficiaries of non-unitised fixed trusts (see Examples 11 and 12 of CPN 025). This is because the transfer of units in unit trusts will generally not be subject to duty unless they fall under the landholder duty regime (see Chapter 4 of the Act).

Section 4(1)(a) of the Regulations excludes a change to the default interests of the default beneficiaries of discretionary trusts and the addition or removal of a default beneficiary. This reflects the position in Chief Commissioner of Stamp Duties v Buckle (1998) 37 ATR 393 and is consistent with Revenue Ruling DUT 107.

However, the movement of dutiable property to a unit trust or discretionary trust from either a person, another trust (even where that trust has the same trustee) or a company is dutiable (see Examples 9, 13 and 14 of CPN 025).

Deceased Estates

Section 4(1)(b) of the Regulations excludes certain changes in beneficial ownership of dutiable property occurring on death (i.e. under a will, codicil or intestacy). This aligns with the policy position to avoid re-introducing ‘death duties’ (which were abolished in NSW in the 1980s).


Section 4(1)(e) of the Regulations exclude ‘the grant, creation, variation or extinguishment of a mortgage, charge or other security over land’. This aligns with the abolition of mortgage duty on 1 July 2016. The provision of a security interest in personal property (section 3(h) of the Act) or surrender for no consideration (section 4(1)(l) of the Regulations) are also excluded.

Leases for no consideration

A grant, renewal or variation of lease for no consideration is generally not dutiable (section 8(3)(e) of the Act). Rent (including prepaid rent) and outgoings such as rates, charges, taxes etc are not treated as consideration for the grant of a lease. Most retail, commercial and residential leases entered into on ordinary commercial terms will not be liable to duty. This is consistent with the abolition of duty on leases in 2008.

The Regulations also exclude:

  • the creation, variation or surrender for no consideration, of a tenant’s interest in fixtures fit-out for commercial premises (section 4(1)(f) of the Regulations)

  • a change in tenancy under a lease for no consideration (section 4(1)(g) of the Regulations)

  • the expiry, extinguishment or merger of one or more leases for no consideration (section 4(1)(j) of the Regulations).

Life estates for no consideration

Section 4(1)(c) of the Regulations excludes the grant or termination of a life estate in dutiable property for no consideration.

Various property rights for no consideration

Transactions relating to easements and profit a prendre for no consideration (sections 3(f) and 3(g) of the Act and 4(1)(g) 4(1)(k) of the Regulations) and water rights (section 4(1)(i) of the Regulations) are also excluded from attracting duty.

Beware that if any of the above ‘out’ transactions are part of a scheme or arrangement to avoid or reduce duty they will be subject to duty under section 8(2A) of the Act (see Example 15 of CPN 025).  


Life Estates for consideration

Grants and termination of life estates will fall in the duties net if they are for consideration. Care needs to be taken for life estates that are already on foot. Any termination or grants for consideration will now attract duty.


As discussed in our last article, the grant of a call option is now subject to duty.

Duty paid on the option fee is not credited towards the duty payable when the option is exercised. There is no refund of duty if the option is not exercised (see Example 1 of CPN 025). A put option fee is not liable to duty (see Example 2 of CPN 025).

Duty will also be payable on a security deposit if the call option is not exercised and the security deposit is forfeited. In those circumstances, the security deposit will be treated as consideration for the granting of the call option (see Example 2 of CPN 025). However, where the security deposit is wholly refundable the security deposit should not attract duty (see Example 3 of CPN 025).

Duty remains payable on the transfer of an option (under Chapter 2), nomination of another person to exercise the option or the novation of the option for consideration (under section 9B).

If you are entering a transaction involving options you should seek taxation advice to avoid unfavourable duty consequences.

Leases for consideration

The creation or extinguishment of a lease for consideration (monetary or non-monetary) is dutiable under 8(1)(b)(ix).

CPN 027 outlines the circumstances where a lease is dutiable and includes the following key takeaways:

  1. Rent disguised as a premium is dutiable

Where a payment is described as prepaid rent, but is not proportionally refundable by reference to the unexpired term of a lease on early termination, it will be treated as a premium (not as rent) and liable to duty (see Frazier v Commissioner of Stamp Duties (NSW) 85 ATC 4735).

  1. Improvements made by the lessee may be dutiable

Duty arises where the lessee is under an obligation to undertake improvements to the land and the improvements become the property of the lessor at the end of the lease.

The dutiable value of the improvement (ie the construction cost) is determined on entry into the lease agreement. The value of improvements (other than fit-out costs) will be the percentage attributed to the value that passes to the lessor when the premises reverts back to them. The longer the term of the lease, the lower the value of improvements passing to the lessor. Evidence of the value of improvements must be provided at the time of stamping (see the table in CPN 027 to calculate the dutiable value of the improvements).

The following transactions may also trigger duty:

  • early termination of a lease by the lessor for various reasons including to grant a new lease to another lessee, or to sell the premises, involving consideration

  • grant of a lease where the lessee pays or the lessor’s legal fees which are non-refundable and greater than $1,000

  • an option to lease land for premium

  • an assignment of a lease

  • attornment of leases on sale.

CPN 026 is yet to be published by Revenue NSW on its website.

For advice or assistance on how these changes might affect you, please contact Lisa and Hayley and subscribe to our Tax Updates.

Authors: Lisa To and Hayley Constantine