2018 state revenue update staying informed · 8.30am – 5.00pm monday to friday...
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2018 State Revenue Update
Staying informed
State Revenue Update 2018Seminar notes
State Revenue Update | Seminar Notes | July 2018 2
Revenue NSWGPO Box 4042Sydney NSW 2001DX 456 Sydney
(02) 9689 6200
www.revenue.nsw.gov.au
Revenue NSW: ISO 9001 – Quality Certified
© State of New South Wales through Revenue NSW, 2018. 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.
Help in community languages is available.
Payroll tax1300 139 8158.30am – 5.00pm Monday to [email protected] First home owner grant1300 130 6248.30am – 5.00pm Monday to [email protected] Unclaimed money1300 366 0168.30am – 5.00pm Monday to [email protected]
Electronic duties returns (EDR)1300 308 863 or 1800 086 6428.30am – 5.00pm Monday to [email protected]
Client education9689 84468.30am – 5.00pm Monday to [email protected]
Duties1300 139 8148.30am - 5.00pm Monday to [email protected] Land tax1300 139 8167.30am - 6.30pm Monday to [email protected] Small Business Grant1300 241 8698.30am - 5.00pm Monday to [email protected]
State Revenue Update | Seminar Notes | July 2018 3
Contents
Land tax 4
- What’s new 6
- Recent cases 7
- Common mistakes 9
Duties 12
- What’s new 15
- Recent cases 15
- Common mistakes 18
Surcharges 19
First home benefits 21
- Common mistakes 23
Unclaimed money 24
Small business grant 25
- Common mistakes 25
Payroll tax 27
- What’s new 28
- Recent cases 29
- Common mistakes 31
State Revenue Update | Seminar Notes | July 2018 4
Land TaxLand 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 2017 determines liability for the 2018 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
Land valuesLand 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).
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There are a number of exemptions and concessions from land tax, including:• Principal place of residence (PPR)• Primary production land • Boarding houses/low cost accommodation• Child care centres• Retirement villages/nursing homes
For more information on exemptions and concessions click here.
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. Click here for more information.
Example: John and Mary are foreign persons. In November 2017 they purchase a unit in NSW with a taxable land value of $350,000. They occupy the property as their PPR. They are exempt from land tax as the property is their PPR. However as they are foreign they are not exempt from surcharge land tax. Their surcharge payable for 2018 is $7,000 ($350,000 x 2%).
To find out more about land tax surcharge click here.
Land Value Rate
$1 - $629,000 NIL
$629,000 - $3,846,000 $100 + 1.6%
$3,846,001 and over $51,572 + 2%
Land Value Rate
$1 and over 2% (in addition to any land tax payable)
Land Value Rate
$1 - $3,846,000 1.6%
$3,846,001 and over $61,536 + 2%
* Grouped companies are only entitled to one threshold per group
Individuals, partnerships, companies* and fixed trusts
Special trusts
Foreign persons (residential land only)
2018 land tax rates and thresholdsThe following table illustrates the land tax thresholds and rates that apply for the 2018 tax year.
State Revenue Update | Seminar Notes | July 2018 6
What’s new
New features in our online servicesOur land tax online services have recently been upgraded to make it easier for customers to interact with us online.
Some of the new features include:• Upload documents – you are now able to upload documents to support your return/applications,
eliminating the need to email documents to us separately• Live account balance – you can now view your current account balance online (remember to allow time
for processing after payments are made)• Live land holdings – when viewing your land holdings you now have the option to view both your land
holdings as at the current date and as at the most recent taxing date. This way you can check we have your details up to date if you have made any changes to your land holdings during the year
• View previous year assessments – previously you were only able to view your current land tax assessment online. You are now able to view your 5 most recent years’ assessments online
• Track status of requests – you can now track the status of your requests online so you know where your return/application is up to
• Option for electronic notifications – we are now giving you the option to nominate whether you would prefer to receive assessments via post or to be notified via email that your assessment is available to view online
Login to land tax online services to try out the new features.
Request an extended instalment plan onlineDid 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. To apply for an extended instalment plan click here.
Remember, if you are unable to obtain an extended instalment plan online you can contact us on 1300 368 710 to discuss your options.
State Revenue Update | Seminar Notes | July 2018 7
Recent cases
Perry Properties Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 235
Issue• Exemption for low cost accommodation
Background
Perry Properties Pty Ltd (“Perry Properties”) owned two properties registered as general boarding houses under the Boarding Houses Act 2012. Both properties provided dormitory style accommodation to residents offered on a per bed basis. Residents were charged a weekly tariff per bed. The Chief Commissioner of State Revenue denied a request for exemption from land tax on the basis that the tariff charged per room was above the maximum allowable tariff as stated in the relevant Revenue Rulings. Perry Properties argued that the criteria for the exemption should be on a “per bed” instead of a “per room” basis.
Decision
The Tribunal held that:• The tariff figures contained in the Revenue Rulings LT095 and LT098 were expressed to be “per room”
and not “per bed”. • The Chief Commissioner of State Revenue’s submission that the tariff charged per room must be the sum
of each of the amounts charged for the individual beds in that room was correct. • The land tax assessments for the 2015 and 2016 land tax years were correct.
For more information, please click here.
Banting (as Executor of the Estate of the Late K C Banting) v Chief Commissioner of State Revenue [2018] NSWCATAD 38
Issue • Primary production land exemption
Background
Banting (as Executor of the Estate of the Late K C Banting) (“Banting”) owned land at Mount Burrell and claimed it was exempt under the primary production land exemption. Specifically, the maintaining of animals for the purpose of sale under s.10AA of the Land Tax Management Act 1956 (“the Act”).
The Chief Commissioner of State Revenue did not grant the exemption on the basis that Banting did not have sufficient evidence regarding the maintenance for of the cattle for sale. Banting sought a review of the decision.
Decision
The Tribunal held that:• A large portion of the land was not used for cattle grazing or any other form of primary production• The Act requires a purpose of selling, which was not demonstrated• The land was not exempt under the primary production exemption
For more information, please click here.
State Revenue Update | Seminar Notes | July 2018 8
Strathavon Resort Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 200
Issue• Exemption for boarding house
Background
Strathavon Resort Pty Ltd (“Strathavon”) owned land and claimed that it was exempt from land tax for the 2015 and 2016 tax years pursuant to s.10Q of the Land Tax Management Act 1956 (“the Act”) as boarding house.
The land had been granted an exemption for previous tax years however in December 2013 new guidelines were introduced requiring boarding houses to be registered under the Boarding Houses Act 2014. Strathavon did not register the premises as a boarding house until February 2016.
The Chief Commissioner of State Revenue exercised his discretion and granted the exemption in relation to the 2014 tax year but disallowed the exemption for the 2015 and 2016 tax years on the basis that the premises had not been registered as a boarding house for either year.
Strathavon argued that had it known of the obligation to register it would have done so and that the delay of the Chief Commissioner of State Revenue in issuing assessments caused the delay in registering the property as a boarding house. Issues of estoppel, misleading statements, negligence, breach of statutory duty and entrapment were also raised by Strathaven.
Decision
The Tribunal held that:• The Chief Commissioner’s delay in issuing land tax assessment notices did not alter the validity of the
assessments and therefore the 2015 and 2016 assessments were correct• Estoppel does not lie against the Chief Commissioner in the discharge of his duty to administer a taxation
law• The Chief Commissioner did not mislead Strathavon nor had he been negligent or breached any statutory
duty.• It was the responsibility of Strathavon to apply for the exemption each year and to register as a boarding
house.
For more information, please click here.
State Revenue Update | Seminar Notes | July 2018 9
Common mistakes
Discretionary trusts and surchargeIf you have a discretionary trust which has a foreign person as a beneficiary or potential beneficiary, it will likely be subject to surcharge land tax. Recently a variation to statute was introduced that allows you to amend your trust deed to remove the trustee’s power to make distributions to any person who may be a foreign person. Such amendments can potentially remove the trustee’s liability to surcharge land tax.
Revenue Ruling No. G 010 Version 2 explains the requirements when amending a trust deed. It is important that any such amendments to a discretionary trust deed must be irrevocable.
This revenue ruling also applies to unit trusts that do not meet the “relevant criteria” specified under s.3A(3B) of the Land Tax Management Act 1956 (the “Act”). Where a unit trust fails to meet the relevant criteria, it is a special trust under s.3A of the Act and may likely be liable for surcharge land tax.
Pro rata land tax assessmentsA common question raised by our customers is why our land tax assessments are not apportioned between the current and previous owners of the property.
The legislation does not allow for a pro rata assessment to be issued. Instead, land tax may be apportioned between the vendor and purchaser through the contract for sale of land. This however, is a matter between the vendor and purchaser and does not involve Revenue NSW. The liable party for any land tax assessment is the owner of the land as at the relevant taxing date (midnight 31 December of the year prior to the taxing year).
Interest on payment plans
Customers often ask why they are being charged interest on their instalment plan. When you receive your land tax assessment notice you have an option of paying the amount in full or via three instalments. These instalments are interest free. However, if you do not pay by the due date on the assessment notice, late payment interest will start to accrue immediately.
In some circumstances you may have the option of requesting a longer period to pay your land tax. These extended instalment arrangements will, however, typically include late payment interest. You may be able to request a remission or reduction in interest once all your instalments have been paid.
State Revenue Update | Seminar Notes | July 2018 10
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.
For more information on secondary deductions please see our website. We also have recorded webinars that explain these concepts in more detail.
Joint ownership and secondary deductionsThere 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.
Example: Andrew owns 3 properties in NSW – each with a different person. He therefore has 3 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 3 properties.
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What to do if you receive an incorrect assessment: objection or variation?
Customers often get confused as to 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.
For more information on when and how to lodge an objection click here.
If you disagree with a land value shown on your assessment you can request a review with the Valuer General.
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Duties
Duty (formerly known as stamp duty) is a tax payable on a wide range of transactions, including the following:• a sale or transfer of land, including improvements in NSW• a declaration of trust over dutiable property in NSW• acquisition of a significant interest in a landholder.
Generally, duty must be paid within 3 months of:• The agreement for the sale of land, or the date of exchange (offer and acceptance)• The execution of a transfer of land, if there is no contract• The declaration of trust, from the date of execution (signing) of the trust deed• The acquisition of shares or units in the landholder company or trust.
The party liable to pay the duty is the transferee (usually the purchaser) or, for a declaration of trust, the duty is payable by the trustee.
The majority of dutiable transactions in NSW are processed by Client Service Providers, and duty payment is lodged with Revenue NSW via lodgement of a return (such as Electronic Duties Return – EDR).
Revenue NSW directly processes transactions for landholder, reassessments for duty and documents lodged by transferees or purchasers who do not have a solicitor or conveyancer.
How is duty calculated?Duty is calculated on the dutiable value of the dutiable property.
The dutiable value is the greater of either the unencumbered value (the actual value, not taking into account any encumbrances such as a mortgage) or the consideration (purchase price).
Example: Sarah purchases an investment property at auction. The property is valued at $750,000, however the price at auction is $785,000. Because the consideration that Sarah pays is higher that the unencumbered value of the property, Sarah must pay duty on the consideration ($785,000).
consideration$500,000
unencumbered value
$400,000
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When do I need a valuation?You will need to provide a valuation for transactions that are not at arm’s length (e.g. related vendor and purchaser), or where there is no consideration or nominal consideration.
Example:Geoff purchases a home from his father. The property is valued at $1.2 million, however Geoff’s father agrees to let Geoff purchase it for $1 million. Geoff must provide a current valuation of the home to support that the correct value is $1.2 million.
Even though the purchase price (consideration) is only $1 million, the actual value of the property is $1.2 million, therefore Geoff must pay duty on $1.2 million (being the higher dutiable value).
Further information on valuations is available on Revenue Ruling DUT 044.
General rates of duty:The rate of duty chargeable on a dutiable transaction is as follows:
Note: The premium rate of duty chargeable for residential land that has a dutiable value exceeding $3,000,000 is $150,490, plus $7 for every $100, or part.
Exemptions and concessions from duty:There are a number of exemptions and concessions available from duty. Common concessions/exemptions include:• change in trustee• transfers between real and apparent purchaser• deceased estates• transfers made in partial conformity with agreements• break up of marriages, de facto relationships, and domestic relationships• corporate reconstructions and consolidations• charitable and benevolent bodies• intergenerational transfer of farmland
Dutiable value Rate of duty
More than $80 000 but not more than $300 000
$1,290 plus $3.50 for every $100, or part, by which the dutiable value exceeds $80 000
More than $300 000 but not more than $1 000 000
$8,990 plus $4.50 for every $100, or part, by which the dutiable value exceeds $300 000
More than $1 000 000
$40,490 plus $5.50 for every $100, or part, by which the dutiable value exceeds $1 000 000
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Surcharge purchaser dutyForeign persons acquiring residential land in NSW must pay a surcharge purchaser duty of 8 per cent. The surcharge is in addition to the duty payable on the purchase of residential property, on the relevant portion acquired by the foreign person.
Example: Carla is a foreign person. She purchases a residential property in NSW with her husband Roberto as joint tenants. Roberto is an Australian citizen. Roberto and Carla need to pay the following duty:
Purchase price: $600,000
Duty: $22,490 (payable by Carla and Roberto)
Surcharge: $24,000 (payable by Carla)
Transactions that are exempt from duty are generally exempt from surcharge purchaser duty.
You can read more information on surcharge purchaser duty here.
Surcharge purchaser duty for discretionary trustsIf you have a discretionary trust which has a foreign person as a beneficiary or potential beneficiary, it will likely be subject to surcharge purchaser duty. Recently a variation to statute was introduced that allows you to amend your trust deed to remove the trustee’s power to make distributions to any person who may be a foreign person. Such amendments can potentially remove the trustee’s liability to surcharge purchaser duty.
Revenue Ruling No. G 010 Version 2 explains the requirements when amending a trust deed. Amendments to a discretionary trust deed must be irrevocable.
Did you know:• When buying or acquiring property in NSW, each purchaser / transferee must complete a Purchaser/
transferee declaration (ODA 076). Information collected through the purchaser/transferee declaration is necessary to meet Commonwealth Reporting Requirements and our responsibilities to administer the Duties Act 1997.
• Revenue NSW usually only processes documents lodged for assessment of duty from customers who do not have legal representation (i.e acting for themselves), or who are requesting a reassessment of duty. Other documents are generally processed by our Client Service Providers.
• You can check which evidentiary requirements must be provided when documents are lodged for assessment of duty here.
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What’s new
Recent cases
Online private rulingsAll requests for private rulings must now be lodged online here. On our website you can submit your request and attach your documentation electronically.
The Salvation Army (NSW) Property Trust v Chief Commissioner of State Revenue (2018) NSWSC 128 Issue• Duty exemption for charitable and benevolent body
Background
The Salvation Army (NSW) Property Trust (“Salvation Army”) purchased a property at Redfern in June 2014. 65% of the total area of the property was to be used as their territorial headquarters whilst the remaining 35% would be subject to two leases.
The Chief Commissioner of State Revenue had assessed Salvation Army with 65% duty in accordance with a partial exemption under s.275A of the Duties Act 1997 (“the Act”), being a transfer or an agreement for sale of dutiable property to an exempt charitable and benevolent body. The concession was granted on the basis that 65% of the total area was to be used for an exempt purpose whilst 35% was to be used for a non-exempt (leasing) purpose.
Salvation Army submitted that it should be entitled to a 100% exemption from duty.
Decision
The Supreme Court held that:• Salvation Army met the requirements of s.275(3) of the Act in that its resources were used in accordance
with its rules and objects being wholly or predominantly for the relief of poverty in Australia.• Predominantly should be interpreted by its ordinary meaning which connotes that the specified purpose
would be the most dominant of the purposes of the institution or organisation.Salvation Army was entitled to a full exemption
For more information, please click here.
State Revenue Update | Seminar Notes | July 2018 16
Al-Jaafaria Society Incorporated v Chief Commissioner of State Revenue (2017) NSWCATAD 283
Issue• Duty exemption on charitable and benevolent body
Background
Al-Jaafaria Society Incorporated (“ASI”) was established in 1991 and its purpose was to cater for the social, educational and religious needs of the general community. In 2015, ASI entered into a contract for sale to purchase a property at Revesby Heights and sought an exemption on the basis that ASI is exempt from duty as a charitable and benevolent body.
The exemption was denied by the Chief Commissioner of State Revenue. ASI then sought a review of this decision.
The Chief Commissioner of State Revenue submitted that for an exemption to apply, ASI must prove that:• its objects include the relief of poverty or the promotion of education in Australia• its resources are used predominantly for this purpose, and• this purpose must be a predominant object
The Tribunal found that ASI’s predominant object was to provide for the relief of poverty abroad and not in Australia. Moreover, ASI’s resources would not be used for educational purposes and that its transactions would be used predominantly for religious purposes.
Decision
The Senior member Isenberg affirmed that:• ASI had not satisfied the requirements for an exemption under s.275 of the Act as a charitable and
benevolent body• The decision of the Chief Commissioner of State Revenue was affirmed
For more information, please click here.
AI Haddad v Chief Commissioner of State Revenue (2018) NSWCATAD 91
Issue• Concession of duty on a transfer from apparent purchaser to real purchaser
Background
AI Haddad purchased a property at Casula from his son and had paid ad valorem duty on a memorandum of transfer. Al Haddad claimed that duty of $50 should apply as the transfer was from an apparent purchaser to a real purchaser. A refund was sought under s.55(1)(b) of the Duties Act 1997.
Al Haddad asserted that the property was purchased by his son upon trust for Al Haddad himself as he had provided the purchase money. The Chief Commissioner was not satisfied that an exemption should apply as Al Haddad had failed to establish that he provided the whole of the purchase money.
Al Haddad sought a review of the decision.
Decision
The Tribunal held that:• Al Haddad had failed to prove that he had provided the whole of the purchase money and therefore the
transfer was liable for ad valorem duty• The decision of the Chief Commissioner of State Revenue was correct
For more information, please click here.
State Revenue Update | Seminar Notes | July 2018 17
Watts v Chief Commissioner of State Revenue (2017) NSWCATAD 320
Issue• Concessional rate of duty for deceased estates
Background
Mr Watts was granted probate by the Supreme Court of NSW for the administration of the estate of his late father. The property was included in the inventory of property of the estate.
The last will and testament of the deceased stated that his estate was to be given to the trusts of his three children as one third each. A clause in the will also mentioned that Mr Watts may purchase the house from the trustee for market value.
In May 2016, Mr Watts, through a contract for the sale of land and in his personal capacity purchased the property from the executor of the estate of the deceased. The contract was assessed for ad valorem duty. Mr Watts sought review on the basis that he had purchased the remaining two thirds share of the property from the other beneficiaries and therefore duty should only be paid on a two thirds share of the value.
The Chief Commissioner of State Revenue argued that a concession under s.63 of the Duties Act 1997 (“the Act”) can only apply to a “transfer of dutiable property” and not for an “agreement for sale or transfer of dutiable property”, which is what Mr Watts had used to acquire the property.
Decision
The Tribunal affirmed that:• The concession under s.63 of the Act could not apply and found in favour of the Chief Commissioner of
State Revenue• Ad valorem duty was correctly paid for the purchase of the property
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Common mistakesLodging forms with Revenue NSWFilling out forms incorrectly can often lead to unwanted delays. When lodging documents with Revenue NSW, ensure that your forms have been completed in full (including checking the reverse side for declarant and witness signatures). Incomplete forms may result in your forms being returned to you.
Make sure that you understand what you are declaring on the relevant declaration forms. If you would like assistance contact us on 1300 139 814.
For example, when lodging a transfer in partial conformity with an agreement for sale, this must be accompanied by a statutory declaration and supporting evidence to show that the transferees were related at the time of the agreement and transfer.
EDR clients and record keepingPlease remember that when dealing with Revenue NSW you are required to retain all relevant information to relating to your transaction for a period of at least 5 years.
Off the plan or vacant land?A common error we find is with purchasers of vacant land mistakenly declaring an “off the plan” purchase on their purchaser declaration form. Off the plan transactions do not include transactions for vacant land.
An “off the plan” purchase is a purchase where you are purchasing land on which a residence is to be erected or developed before completion of the sale or transfer. When completing the purchaser declaration form, if you are purchasing vacant land, please ensure to tick “no” at the question “is this sale an off the plan purchase?”.
Duty deferral for off the plan purchasesIf you are purchasing a residence off the plan, you may receive a 12 month duty liability deferral. To obtain this deferral, you must lodge a declaration stating your intention to occupy the property as your principal place of residence for a continuous period of six months, commencing within 12 months from the completion of the sale or transfer. The 12 month deferral is not available to foreign persons, even if they do intend to reside in the property.
If you are an investor purchasing a residence off the plan, you will not be eligible to receive the 12 month duty liability deferral (duty must be paid within 3 months from the date of the contract).
State Revenue Update | Seminar Notes | July 2018 19
SurchargesSurcharge purchaser duty and surcharge land tax apply to residential land acquired or owned by a foreign person.
Where land is partly residential, surcharge for duty and land tax only applies to the residential portion of the land. Surcharge is only payable by the foreign person in relation to their respective interest in the land.
Residential landResidential land consists of the following:
Foreign personsA ‘foreign person’ is defined in Revenue Ruling G 009. A foreign person is a person who is not an Australian citizen or who is not ordinarily resident in Australia. Australian citizens are not foreign persons, wherever they are located in the world.
IndividualsIn order to be ordinarily resident in Australia a person must:• have been in Australia during 200 or more days in the period of 12 months immediately preceding the
liability date, and• not be subject to any limitation as to time for their continued presence in Australia
This is illustrated in the following flow chart.
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Corporations and trustsA foreign person also includes corporations, trusts and foreign governments.
A corporation or trust (trustee) is a foreign person if:• a person not ordinarily resident in Australia, together with any one or more of their associates, holds at
least a 20% interest in the corporation or trust, or• two or more persons not ordinarily resident in Australia, together with any one or more of their
associates, hold an aggregate of least 40% interest in the corporation or trust.
This is illustrated in the following flow chart.Surcharges do not apply to commercial residential premises. For more information please see Revenue Ruling G 011.
Surcharge exemptionsIf you are an Australian permanent resident or New Zealand Citizen holding a special category visa, you can apply for an exemption from surcharge if you intend to occupy the property as your principal place of residence (PPR).
To apply for this exemption, you must lodge a declaration stating that you intend to occupy the property as your PPR for a continuous period of 200 days within 12 months of the liability date.
If you do not use and occupy the property as your PPR, the surcharge will be reassessed with any accrued interest and applicable penalties.
State Revenue Update | Seminar Notes | July 2018 21
First home benefitsFirst home buyers assistance schemeThe first home buyers assistance scheme is for eligible first home buyers purchasing new or existing homes, or vacant residential land.
The scheme provides an exemption from duty for new and existing homes valued up to $650,000. For homes valued between $650,001 and $800,000 it provides a concession.
The scheme also extends to purchases of vacant land on which you intend to build your first home. An exemption exists for land valued up to $350,000, whilst a concession is available for vacant land valued $350,001 and $450,000.
Shared equity arrangements under first home buyers assistanceThe first home buyers assistance shared equity arrangements allows eligible purchasers to buy property with other parties and still receive a concession. To qualify, the eligible purchasers must purchase at least 50 per cent of the property.
Other eligibility criteria exist. To find out more click here.
PrivateDwelling
Vacant Residential
Land
Value up to $650 000 -
exempt
Value up to $350 000 -
exempt
$650 001 to$800 000 - concession
$350 001 to$450 000 - concession
State Revenue Update | Seminar Notes | July 2018 22
In addition to the eligibility criteria, first home buyers must also meet the mandatory residence requirement: to reside at the home as their principal place of residence for a continuous period of at least six months, commencing within 12 months from completion.
Your principal place of residence is the home that you primarily reside in.
If you do not meet the eligibility or residence requirements under the first home owner (new homes) grant and / or the first home buyers assistance schemes, you will be required to repay these first home benefits, plus any accrued interest and penalties.
First home owner grant (new homes) schemeThe first home owner grant (new homes) scheme is a grant of $10,000 and is limited to new homes worth up to $600,000 for contracts to purchase a new home (including off the plan and substantially renovated homes).
A higher cap of $750,000 applies for comprehensive home building contracts, or a building of a new home by an owner builder.
A new home is defined as ‘a home that has not been previously occupied or sold as a place of residence, and includes a substantially renovated home and a home built to replace demolished premises.’
As with the first home buyers assistance scheme (exemption or concession from duty), applicants and their spouses must meet the eligibility criteria (found here).
State Revenue Update | Seminar Notes | July 2018 23
Did you know:First home buyers can still rent out the property (whether it is the whole of the home, or by room), provided that at least one applicant meets the mandatory residence requirement (residing in the property for a minimum of six consecutive months, commencing within 12 months from the date of completion).
You may be required to provide documentary evidence to support that you have met the residence requirement at the property.
If you cannot meet the residence requirement for the first home owner grant (new homes) scheme and/or the first home buyers assistance scheme, you must notify us in writing within 14 days after the period allowed for occupation. You will be required to repay any benefits received, plus any accrued interest and applicable penalties.
Common mistakesMisunderstanding the term ‘spouse’A spouse is not just a married person; a person is a spouse of another person if they are legally married, or they are living together as a couple in a de facto relationship (this includes same sex couples).
A de facto relationship is a relationship between two adult persons who live together as a couple, and who are not married to one another or related by family. There is no time limitation to be considered de facto partners.
Misunderstanding the residence requirements Some common misconceptions around the residency requirements include:• as long as the property is left vacant for six months and not leased, the residence requirement is met –
this is not correct. You need to actually reside in the property in order to meet the residence requirement• renovating the property whilst using another residence to cook, shower, sleep, etc. complies with
the residence requirements – again, this is not correct. If you are not residing in the property it is not considered to be your principal place of residence
• living in the property for a period of less than six months is acceptable without seeking our approval – you may be able to get a reduction in the six month residence requirement however you must request this in writing
• commencing occupation of the home after the 12 month period is acceptable without seeking the Commissioner’s approval – in special circumstances we may be able to allow an extension of time for you to commence residing in the property however you must request this in writing. Failing to do so can mean that you may have to repay the first home benefits plus interest and/or penalties
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Unclaimed moneyDid you know that Revenue NSW holds unclaimed money? Whilst some types of unclaimed money, such as from bank accounts, shares and superannuation, are held by other government organisations (such as ASIC or the ATO), the following types of unclaimed money are held by Revenue NSW:
• dividends, principal and interest, trust account funds• expenses, refunds and overpayments• deposits and premiums, unpresented cheques• proceeds of sale, royalties, commissions• creditors, debentures, bonds• convertible notes, superannuation lodged between 1 July 1997 and 30 June 2007• NSW public sector superannuation
Unclaimed money is money held in an account that has been inactive for at least 6 years. Once the 6 years have passed, it must be deposited with us. All NSW enterprises holding unclaimed money as at 30 June in any year must send the money to us by 31 October in that year. For information on how to send unclaimed money to us please click here.
Searching for unclaimed money
You can search for unclaimed money using our online search facility. Generally, you have 6 years from the time we receive the unclaimed money to make a claim, however, we will consider a claim after 6 years. There is no time limit for claiming unclaimed superannuation benefits.
Using our online search facility, enter your name. Remember to try several variations (including a former/maiden name) as the enterprise which provided us with your money may have recorded it differently. For example, Christine Francis Arnold (nee Bolton) might try:
• Christine Francis Arnold• C Arnold• Arnold Christine• Christine Bolton• C F Bolton• Bolton Christine
Once you have located your money through our online search facility you will be able to make a claim online. You will need to provide documentation that establishes your identity, a connection to the money and a connection to the enterprise that forwarded us the money.
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Small business grantThe small business grant scheme is an incentive to increase employment in small businesses in NSW. Under the scheme, a grant of up to $2,000 is paid to small businesses for each new employee – a proportioned amount is paid for casual or part-time employees.
To be considered as a small business for the grant you must have an active ABN and not have had a payroll tax liability in the last 12 months. This includes sole traders and partnerships.
To be eligible, your new employee needs to be:• working in a new position• have commenced their employment on or after 1 July 2015 and before 1 July 2019• maintain their employment with you for at least 12 months• perform their duties wholly or mainly in NSW.
In addition, you will need to:• register your new employee within 60 days of them commencing work• ensure the number of your full-time equivalent (FTE) employees has increased since your new
worker started and the increase is maintained over a 12-month period. To work out your FTE follow the steps here
• ensure you lodge your claim for the Grant within 60 days of the new employee’s 12-month anniversary date.
Common mistakesSmall business grant or jobs action plan rebate?If you are registered for payroll tax in NSW you are not eligible for the small business grant. A similar incentive called the jobs action plan rebate is, however, available if you engage new employees before 1 July 2019. For more information click here.
Incorrectly calculating FTE when registering a new employeeWhen you register your new employee ensure you do not include the new employee in your calculation of the FTE. You will include this new employee in your FTE calculation after their 2 month anniversary when you are lodging your claim.
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Example: Amy has her own company, Amy’s Sweet Treats. The business employs one full time employee and one casual employee, they work 38 hours and 10 hours respectively. With demand for her treats increasing Amy employs another full timer. As Amy has created a new position she registers for the small business grant the day the new employee starts.
To submit her application Amy calculates her full time equivalent (FTE) as 1.26 (1+10/38), she correctly excludes the new employee in this calculation. On the one-year anniversary of the new employee starting Amy submits her claim for the grant. She notes the FTE as 2.26 (2+10/38). She includes all employees in this calculation. As Amy met the requirements for the SBG she is paid $2,000 via EFT.
Providing supporting evidenceNot providing sufficient evidence when lodging your claim for the grant can result in delays in processing your claim. When you claim the grant please ensure you provide adequate evidence to support your entitlement. This evidence can include payslips before the anniversary date and the PAYG Payment Summary relating to the relevant 12 month grant period. Please remember to redact Tax File Numbers on all supporting documentation submitted to protect the privacy of your employees. If you are not sure what information to provide please contact us on 1300 241 869.
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Payroll taxPayroll tax is a self-assessing tax paid on wages over the payroll tax threshold. For the 2017-18 financial year the threshold is $750,000. This has increased to $850,000 for the 2018-19 financial year. The tax rate of 5.45 per cent stays the same.
All businesses registered for payroll tax must lodge an annual reconciliation by 21 July each year. In addition, if a business is a monthly lodger, they need to ensure they lodge a monthly return by the following 7th of each month. If either date falls on a weekend or public holiday, lodgement is required the next business day.
When businesses are calculating liable wages they need to ensure they include the following remuneration paid to employees, deemed employees and company Directors:• Gross wages• Allowances
» For exempt components relating to motor vehicle allowance and overnight allowances records must be kept to substantiate e.g. logbooks.
• Directors Fees » Include fees paid to both working and non-working directors.
• Fringe benefits either using the; » Actual method Calculate the actual fringe benefits by adding together the Type 1 and Type 2
aggregate values with the Type 2 gross up amount of 1.8868. » Estimate method
* For businesses lodging monthly returns, to calculate the fringe benefit component to include in the returns from July to May a calculation using the businesses previous financial years FBT return can be used. For this method add the type 1 and type 2 aggregate amounts together noted, at question 14, and multiply by the type 2 gross up amount (1.8868). For each month use a twelfth (1/12th) of this figure. * When lodging the annual reconciliation use the type 1 and type 2 aggregate amounts listed at question 14 of the FBT return lodged May of that year. Then multiply this figure by the type 2 gross up amount of 1.8868. Include the final figure in the annual reconciliation.
• Shares and options » The market value of shares within employee share schemes needs to be included on its relevant
date less any employee contributions. * In the financial year the shares are issued the business may select to include the value at either the grant or vesting date. If grant date is not selected at this time, the shares will need to be included when they are vested.
• Superannuation » Include superannuation guarantee, salary sacrifice and top ups.
• Termination payments » Include all components of termination payments less any components which are income tax
exempt e.g. lump sum D payments.• Third party payments
» In circumstances where an employee or director has requested their wages be re-directed to a third party; for example, to their partner/spouse, private company or super fund, the businesses making payment need to ensure the payments are included in their liable wages.
• Relevant Contactor payments » Contractor payments are liable, less GST and approved deductions, unless one of seven exemptions
can be applied. To view all exemptions please click here. » If excluding contractor payments, a business must keep records as supporting evidence to their
claim for the exemption.
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Grouping Businesses can be grouped through related corporations, common control and common employees. When a business is grouped it needs to ensure only one member in the group is claiming the threshold for payroll tax. More information can be found here.
Apprentice and trainee rebate A rebate is available to offset wages paid to apprentices and trainees who are registered with NSW Department of Industry (NSW DOI). All wages paid to NSW DOI registered apprentices are eligible for this rebate no matter how long the employee has worked for the business. For a trainee to be eligible the trainee must be a new worker who has not worked more than 3 months full time or 12 months casual/part-time for the business. For further information click here.
Jobs action planThe jobs action plan provides a payroll tax rebate of up to $6,000 to businesses which employ new workers. To be eligible for this rebate a new worker must be employed full time, part-time or on a casual basis and perform services wholly or mainly in NSW. The new worker must have commenced working on or after 1 July 2011. To qualify for the full rebate the employee must remain with the business for at least two years. If a business is eligible, they need to register for the scheme within 90 days of the new employee starting. For more information or to register click here.
What’s newThe recent budget announced the payroll tax threshold will increase from 1 July 2018.
The threshold rates for the next four years will be:• $850,000 for 2018-19 financial year• $900,000 for 2019-20 financial year• $950,000 for 2020-21 financial year• $1,000,000 for 2021-22 financial year
$850kFY 2018-19
$1 milFY 2021-22
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Recent casesChief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184Decision 28 July 2017
Issues• Grouping provisions• Retrospective
Background
The proceedings arose out of the failure of the Second Respondent, Tri-City Trucks (NSW) Pty Ltd (In Liquidation) (“Tri-City Trucks”) to pay payroll tax over a seven year period (the 2005-2012 financial years). Smeaton Grange Holdings Pty Ltd (‘Smeaton”), the First Respondent, and Tri-City Trucks were grouped for the 2005 to 2012 financial years pursuant to s. 72(1) of the Payroll Tax Act 2007 (“the Act”) on the basis that Michael Gerace had a controlling interest in each of the businesses. Similarly, Smeaton and Tri-City Smash Repairs Pty Ltd (“Smash Repairs”), the Third Respondent, were grouped on the basis that Ralph Gerace was deemed to control each of the businesses. As Smeaton was a member of the two groups, all three entities were part of a single larger group in accordance with the Act.
On 27 June 2014, Michael Gerace executed a “Deed Poll of Disclaimer” and a “Deed Poll of Disclaimer 2004 Year” (“Disclaimers”) to disclaim any right, entitlement or interest in respect of the Smeaton Trust or arising pursuant to the Smeaton Trust Deed.
The Supreme Court determined that there was no reason as a matter of principle why a person should be compelled to accept a personal right against his or her wishes, and therefore found that the disclaimers executed by Michael Gerace were effective, notwithstanding that they were given without consideration.The Chief Commissioner of State Revenue appealed to the NSW Court of Appeal, contending that the Supreme Court erred in reasoning by analogy from the law governing the disclaimer of gifts. The Chief Commissioner of State Revenue argued that unlike a gift at law, the creation of a “fully constituted discretionary trust” was complete without any agreement by the object. Therefore, the principles governing disclaimer of a gift did not apply to the creation of a discretionary trust with nominated objects.
Decision
The NSW Court of Appeal held that Smeaton became liable to payroll tax by force of law 21 days after the end of each financial year.
Smeaton’s liability under the legislation was to be determined by reference to the legal relationships then in existence and the facts at the relevant time. Michael Gerace’s disclaimer was not upheld retrospectively to dissolve grouping provisions.
For more information click here.
Novus Capital Ltd v Chief Commissioner of State Revenue [2018] NSWCATAD 72 Decision 29 March 2018
Issue• Contractor provisions• Wages under third party payment provisions• Interest and penalty tax charges
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Background
The Novus Capital Ltd (Novus) case involved payments made to thirteen individuals, one group of two individuals and one company who provided financial services on behalf of Novus, collectively referred to as Authorised Representatives (ARs).
The Chief Commissioner of State Revenue issued notices of assessment dated 28 November 2014 for the tax years 30 June 2009 to 30 June 2014. The issues for determination fell within two main categories, being:
(1) Whether payments made to ARs who provided financial services on behalf of Novus were assessable as relevant contracts under the Payroll Tax Act 2007. Novus argued that the ARs were independent contractors and that most of them were exempted under the 90 days test or the two or more persons test, under sections 32(2)(b)(iii) and 32(2)(c) of the Act.
(2) Whether payments made by Novus to Cennlen Pty Ltd (Cennlen) were for the provision of services to Novus by a director of both entities and therefore wages under the third party payment provisions of the Act.
Decision
Justice Isenberg found that:• The ARs were relevant contracts for the purposes of the Act. However, no contracts could be exempted
under the 90 day test as Novus hadn’t provided sufficient evidence to substantiate their claim. • The exemption for two or more persons, could be applied to certain ARs where Novus was able to
demonstrate that the ARs engaged others (such as other ARs) for the performance of services. However, where Novus directly engaged the services of a third party and they performed services for or with an AR, the exemption would not apply.
• The payments from Novus to Cennlen were assessable as third party payments, but the calculation of wages was not correct.
The judgement regarding third party payments is currently being appealed by Novus.
It was also determined that interest and penalty tax charges were to remain on the tax shortfall amounts as reasonable care was not established.
For more information click here.
H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820Decision 5 June 2018
Issues
• Employment agency provisions• Deemed wages
Background
H R C Hotel Services Pty Ltd (HRC) operated a hotel housekeeping business. For NSW payroll tax purposes HRC was grouped with Hotel Operations Solutions Pty Ltd and Housekeeping Solutions Pty Ltd (Housekeeping Solutions). To fulfil contracts with various hotels, both HRC and Housekeeping Solutions entered into contracts with a number of sub-contractor companies for additional housekeeping staff to assist with seasonal demands.
The Chief Commissioner of State Revenue deemed the contracts between HRC and its sub-contractors to be employment agency contracts under Division 8 of Part 3 of the Payroll Tax Act 2007 (“the Act”). Therefore, HRC was deemed to be an employment agent which had procured the services of service providers through sub-contractor companies in order to fulfil their contracts with their clients (the various hotels).
Another issue raised was whether payments made by HRC to the sub-contractor companies which included a profit component were deemed wages under section 40 of the Act. The question was whether the deemed wages included the profit component made in connection with the payment to the service provider, or whether only the payments made to the service providers were deemed wages.
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Decision
The Supreme Court affirmed the decision of the Chief Commissioner to assess HRC as an employment agent. It was determined that the workers HRC engaged for the hotels were working in and for the end-users’ (hotels’) business as would an employee and not just for the end-users’ benefit.
The Court also confirmed that payments made by HRC to the sub-contractor companies (including any profit component) were “amounts paid in relation to the service provider in respect of the provision of services in connection with the employment agency contract” and therefore deemed wages as per the Act.
For more information click here.
Common mistakesCommon lodgement errors• When excluding exempt allowances when lodging your returns, ensure you have maintained records to
support your claim. For example, if exempting a component of motor vehicle allowances ensure a log book has been maintained
• When including fringe benefits gross up by the type 2 rate (1.8868), not the type 1 rate• All contractor payments are liable unless you have evidence to support an exemption. If you do not have
adequate evidence ensure you include contractor payments (less GST and approved deductions) in your payroll tax calculation
• Ensure you include all components of superannuation in your return. This includes the superannuation guarantee component, salary sacrifice and top-ups.
Apprentices and traineesIf you are claiming the jobs action rebate on any apprentice or trainees, ensure they are registered with the NSW Department of Industry (NSW DOI). If they are not registered with NSW DOI, you are unable to claim the rebate for this worker.
Lodgement and payment of returnsUpon lodging your return, it is important to remember to also make payment. Failing to do so can lead to interest and penalties. Some customers utilise our online payroll tax calculator to calculate their monthly payroll tax but fail to follow up with payment. Please ensure that once you have calculated your payroll tax liability you make the necessary payment.
