ANALYSIS: NSW has introduced new duty laws that will apply to lease transactions, but there are many unresolved questions about how the new rules will work.
For any given transaction, businesses need to know if tax applies . Presently, parties engaging in lease transactions in NSW that may involve non-monetary consideration will need to wait longer for that certainty.
Duty has applied in NSW to leases granted for a monetary premium since July 1, 2006. The change to apply duty to leases granted for non-monetary consideration is significant.As an example, assume a church enters into an agreement for lease with a developer. Under the agreement, the developer will construct a new retirement village on a certain parcel of land at a cost of $80 million.
Further, would it make any difference if the church was to grant the 99-year lease to the developer prior to the retirement village works being commenced? In a GST context, this does make a difference.The ATO has issued a public ruling, GSTR 2015/2, which refers to such transactions as “development lease arrangements”. The ruling provides GST guidance on projects involving state government agencies and local councils.
In this context, it should be noted that reimbursements of a landowner’s costs will generally be taken to involve a payment of consideration that triggers duty .For example, assume a landlord agrees to vary an office lease at the request of a tenant on the condition the tenant pays $2000 to reimburse the landlord’s legal costs. This payment is consideration and likely to trigger duty. On $2000, the assessed duty is only $25, but nonetheless a lodgement is now required.
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