A new bill, the Revenue Legislation Amendment Bill 2023 was introduced into the New South Wales Parliament on 11 May 2023.
The Bill, if passed, will amend the Duties Act 1997 (NSW) to remove the 90% concession that currently applies to the acquisition of public landholders such as listed companies and trusts which hold land in New South Wales. Such acquisitions would then be treated in a similar way to acquisitions of private landholders.
To give an example of the impact of these amendments, suppose that Bidco acquires an ASX listed Target which holds interests in land (such as freehold land, leases, items fixed to land) of $50 million and goods in New Wales valued at $50 million.
Under the landholder duty regime as at the date of this article, Bidco would incur a duty liability of $548,420. However, once the Bill is passed and with the removal of the 90% concession, such an acquisition would instead incur a duty liability of $5,484,200.
The Bill does not appear to contain any transitional provisions. This means that for any present M&A deals where the acquirer (ie. Bidco in the above example) is in the process of a takeover of a listed company or trust, and that takeover is to complete after 1 July 2023, this could mean an increase in Bidco's landholder duty costs by 90%.
It will be interesting to see whether other States adopt a similar approach to New South Wales. Western Australia and the Northern Territory are presently the only two jurisdictions which do not provide a concession for acquisitions of public landholders.
As the changes will increase transaction costs for public M&A deals, they are expected to have an impact on the level of M&A activity for listed entities that have material landholdings in NSW.
The Bill also allows the Chief Commissioner to extend the application of the principal place of residence exemption from land tax to up to 6 years (up from 4 years) on land which is not occupied by the owner where building or other works have commenced.
If the legislation is passed, these changes will take effect from 1 July 2023.