On 19 May 2022, the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW) received royal assent (the Amending Act). The Amending Act made a number of amendments to the Duties Act 1997 (NSW) (the Duties Act). These amendments impose duty on:
(a) any changes in beneficial ownership of dutiable property, except for certain excluded transactions; and
(b) acknowledgements of trust over dutiable property.
The effect of the amendments is to increase the number of transactions and actions that can potentially be liable to transfer duty. In particular, the granting of a call option to purchase land or a call option to purchase land together with a put option over the same land in New South Wales is now deemed to result in a change in beneficial ownership, and thereby constitute a dutiable transaction on which duty, even if only nominal, is payable.
The Amending Act also replaced the existing anti-avoidance regime for duty with new Part 10A of the Taxation Administration Act 1996 (NSW) (TAA) as well as introducing a new promoter penalty regime to deter the promotion of tax avoidance schemes. This means that taxpayers should carefully consider the amendments to the duty laws, as transactions that previously may have not been subject duty may now be dutiable transactions. The changes will take effect for transactions entered into on or after 19 May 2022. Certain transitional provisions apply for arrangements entered into prior to this date.
The Amending Act introduced new subsection 8(1)(b)(ix) into the Duties Act which imposes duty on “another transaction that results in a change in beneficial ownership of dutiable property, other than an excluded transaction”. This means that a transaction that does not constitute a transfer of property or is not one of the transactions listed at paragraphs (i) to (viii) of subsection 8(1)(b) of the Duties Act may still be dutiable if it results in a change in beneficial ownership and is not an excluded transaction.
The Amending Act introduced definitions for “beneficial ownership”, “change in beneficial ownership” and “excluded transaction” to subsection 8(3) of the Duties Act as follows:
“Beneficial ownership” includes ownership of dutiable property by a person as trustee of a trust.
“Change in beneficial ownership” includes the following:
(a) the creation of dutiable property,
(b) the extinguishment of dutiable property,
(c) a change in equitable interests in dutiable property,
(d) dutiable property becoming the subject of a trust,
(e) dutiable property ceasing to be the subject of a trust.
“Excluded transaction” means the following:
(a) the purchase, gift, allotment or issue of a unit in a unit trust scheme,
(b) the cancellation, redemption or surrender of a unit in a unit trust scheme,
(c) the abrogation or alteration of a right relating to a unit in a unit trust scheme,
(d) the payment of an account owing for a unit in a unit trust scheme,
(e) the grant, renewal or variation of a lease for no consideration,
(f) the grant of an easement for no consideration,
(g) the grant of a profit a prendre for no consideration,
(h) the provision of a security interest within the meaning of the Personal Property Securities Act 2009 of the Commonwealth,
(i) a change in a trustee’s right of indemnity,
(j) the creation of an interest in dutiable property by statute,
(k) a transaction of a kind prescribed by the regulations,
(l) a combination of the transactions referred to in paragraphs (a) to (k).
An option to purchase land in New South Wales is defined to be dutiable property in subsection 11(1)(k) of the Duties Act. Accordingly, the grant of an option to purchase land in New South Wales is the creation of dutiable property. Pursuant to new subsection 8(3)(a) of the Duties Act, the creation of dutiable property constitutes a change in beneficial ownership and is therefore a dutiable transaction. This means that duty is now be payable on the grant of an option to purchase land in New South Wales.
Revenue NSW has published a guide to the changes implemented by the Amending Act. Relevantly in relation to the imposition of duty on any changes in beneficial ownership, Revenue NSW states: 
Section 8(1)(b)(ix) of the Duties Act 1997 introduces duty on certain transactions that results in a change of beneficial ownership of dutiable property. This includes the creation of dutiable property. This means that duty will be payable on the grant of a put and/or call option.
In separate guidance that Revenue NSW has published specifically in relation to options and transfer duty, it similarly states: 
A put option and/or call option granted over dutiable property in NSW (such as over land or an interest in land) is a ‘change in beneficial ownership’. This means that duty is payable on any grant fee paid for a put and/or call option entered into from this date.
[Revenue NSW’s emphasis]
Accordingly, Revenue NSW considers that the granting of an option will be a dutiable transaction.
Put simply, the granting of a put and/or call option to purchase land in New South Wales is deemed to result in a change of beneficial ownership, being the creation of a dutiable property in the form of an option to purchase to land in New South Wales.
In such instances, Revenue NSW considers that ad valorem transfer duty is payable on the fee paid for the grant of the option. When an option is granted, the grantee/transferee (being the person to whom the option is granted) should be liable to pay the duty on the option fee. If no fee is paid for the grant of the option, nominal duty of $10 is payable. The grantee/transferee must complete Revenue NSW form ODA 081 – Declaration for the Grant of a Put Option and/or Call Option.
As well as additional costs in the form of duty, this will increase the administrative burden on all taxpayers, including those who are granted options for no consideration. Duty paid on the option fee is not credited towards the duty payable when the option is exercised. If the call option is not exercised, a refund of duty will not be issued for duty paid on the grant of option. A subsequent transfer or novation of an option to purchase land in New South Wales, or a nomination under the terms of an option, will remain a dutiable transaction.
We note that there is a question as to whether the grant of a put option by itself would be a dutiable transaction. Arguably, a put option, being an option to require another party to purchase land, is not the grant of an option to purchase land in New South Wales. Therefore, arguably it is not the creation of dutiable property, meaning it may not be a dutiable transaction. In that regard, Revenue NSW Form ODA 081 may support this contention, as it contains tick boxes for “call option” and “put and call option”, but no box for “put option” by itself. However, Revenue NSW’s consistent references in its guidance published so far to “put and/or call options” means that the position is unclear. It may be that further guidance will be issued.
The Amending Act introduced new section 8AA into the Duties Act which charges duty on the making of a statement that:
(a) purports to be a declaration of trust over dutiable property, but
(b) merely has the effect of acknowledging that identified property vested, or to be vested, in the person making the statement is already held, or to be held, in trust for a person or purpose mentioned in the statement.
The amendments were introduced in response to the judgment of the Court of Appeal in Chief Commissioner of State Revenue v Benidorm Pty Ltd  NSWCA 285 (Benidorm). In that case the Court of Appeal held, among other things, that a document that did not effect a transaction but merely acknowledged an existing legal position was not liable to transfer duty under the Duties Act.
While the legislature has stated that the section 8AA is in direct response to the Benidorm case, we consider that there may be unforeseen consequences for taxpayers. Absent any administrative guidance to the contrary, the provision appears to impose duty on any statement that purports to be a declaration of trust, where that statement merely has the effect of acknowledging that identified property vested, or to be vested, in the person making the statement is already held, or to be held, in trust for a person or purpose mentioned in the statement. In contrast, section 8(1)(b)(ii) of the Duties Act, which provides that “a declaration of trust over dutiable property” is a dutiable transaction, contains no reference to the making of a statement. It remains to be seen whether the reference to the making of a statement in new section 8AA of the Duties Act widens the scope of dutiable transactions in respect of declarations of trust over dutiable property.
The Amending Act removed the anti-avoidance regime for duty, which was previously contained in Chapter 11A of the Duties Act and introduced Part 10A into the TAA. This means the anti-avoidance rules, which are broader than the previous rules, now apply to all state taxes, not just duties. The Amending Act has also introduced a promoter penalties regime in the form of Division 3 of Part 10A to the TAA, which prohibits the promotion of tax avoidance schemes.
The effect of the amendments is to impose duty on any changes in beneficial ownership of dutiable property and on acknowledgements of trust over dutiable property. We consider that many taxpayers may be affected by the amendments, and the administrative burden will now increase. It is likely that further administrative guidance will be issued by Revenue NSW. In the meantime, taxpayers should carefully consider any arrangements in respect of dutiable property in New South Wales and whether the amendments introduced by the Amending Act apply. Please contact us if you would like to discuss any existing or proposed transactions.
 Revenue NSW, Legislation Amendment Act 2022 guide (Web Page) <https://www.revenue.nsw.gov.au/electronic-duties-for-professionals/professionals-resources/duties-technical-guides/legislation-amendment-act-2022-guide>.
 Revenue NSW, ‘Change in beneficial ownership - Granting of an Option’ Legislation Amendment Act 2022 guide (Web Page) <https://www.revenue.nsw.gov.au/electronic-duties-for-professionals/professionals-resources/duties-technical-guides/legislation-amendment-act-2022-guide?result_396764_result_page=3>.
 Revenue NSW, ‘Transfer duty – Options’ Taxes, duties, levies and royalties (Web Page) <https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/transfer-duty/options>.
 Explanatory Note, State Revenue and Fines Legislation Amendment (Miscellaneous) Bill 2022 (NSW) 2; see also Revenue NSW, ‘Acknowledgement of trust (new dutiable event)’ Legislation Amendment Act 2022 guide (Web Page) <https://www.revenue.nsw.gov.au/electronic-duties-for-professionals/professionals-resources/duties-technical-guides/legislation-amendment-act-2022-guide?result_396764_result_page=4>.
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