Decision Alert: Supreme Court Of New South Wales Clarifies When Liability For Duty Arises In Context Of Electronic Transactions

On 30 June 2026 the Supreme Court of New South Wales handed down its judgment in Forever Grateful Holdings Pty Ltd v Chief Commissioner of State Revenue [2026] NSWSC 761, which clarified the point in time at which the relevant facts are to be considered when determining a duty liability arising under the Duties Act 1997 (NSW) (Duties Act). 

The decision concerned the proper construction of section 12 of the Duties Act, specifically, where a transfer is effected by an electronic registry instrument, whether the liability for duty arises on the date when the instrument is first provided to the Chief Commissioner, or on the date the instrument is first digitally signed. 

Hmelnitsky J rejected the Chief Commissioner's broad construction of section 12(4)(b) and held that the provision of an unexecuted draft instrument to Revenue NSW did not crystallise a liability for duty in this case.

The case is important as:

• it clarifies that section 12(4)(b) of the Duties Act is directed at instruments that effect a transfer but are not signed by anyone, not at draft instruments awaiting future execution.
• it offers significant practical guidance for those involved in electronic conveyancing transactions, particularly in the context of transfers of dutiable trust property arising from a change in trustees or where it is common for Revenue NSW to request draft transfer documents as part of assessing duty.
• it is a reminder that under the Duties Act, the time at which a dutiable transaction occurs (from the perspective of ascertaining relevant facts) may differ from the day on which a liability for duty arises. This point is of broad application, as the specific time at which a transaction occurs can be significant in determining the taxpayer’s liability for duty, as the facts at that time will be relevant for several factors (for example, whether criteria for an exemption have been met, the value of the property subject to a dutiable transaction, or the landholdings of a landholder in which a relevant acquisition has been made).

Legislative Background

Section 54(3) of the Duties Act provides that nominal duty of $100 is chargeable in respect of a transfer of dutiable trust property as a consequence of the retirement of a trustee or the appointment of a new trustee if the Chief Commissioner is satisfied that certain requirements have been met. Relevantly, conditions under section 54(3) include that none of the continuing trustees remaining after the retirement of a trustee is or can become a beneficiary under the trust and none of the trustees of the trust after the appointment of a new trustee is or can become a beneficiary under the trust. 

Where section 54(3) applies, a transfer will also be exempt from surcharge purchaser duty under Chapter 2A by reason of section 104ZK(1)(a) of the Duties Act. 

Section 12 of the Duties Act deals with when a liability for duty arises. Section 12(2) provides that if a transfer of dutiable property is effected by an instrument, the liability for duty arises when the instrument is first executed. Relevantly, section 12(4) provides that an electronic registry instrument is taken to be first executed:

‘(a)          if the instrument is digitally signed by a subscriber within the meaning of the Electronic Conveyancing National Law (NSW)—on the date the instrument is first digitally signed by the subscriber, or

(b)          otherwise—when the Chief Commissioner first receives information relating to the instrument.’

Factual Background

The plaintiff was the trustee of the Hume Enterprises Family Investment Trust (the Trust). The plaintiff was appointed as trustee of the Trust on 5 March 2024 when the former trustee, Hume Contracting Pty Ltd (Hume Contracting), retired.

On 15 July 2024, Hume Contracting (as transferor) and the plaintiff (as transferee) executed a transfer in respect of a property in Moama, NSW (the Property) which had been acquired and held by Hume Contracting as trustee of the Trust. The transfer form was electronically signed by the solicitors on behalf of the transferor and transferee, as a 'subscriber' within the meaning of the Electronic Conveyancing National Law (NSW).There was no dispute that when Hume Contracting and the plaintiff executed the transfer on 15 July 2024, the requirements of sections 54(3) and 104ZK of the Duties Act were met.

However, on 10 May 2024, the plaintiff's solicitors had created on the PEXA Exchange an undated and unexecuted form of transfer of the Property and on 24 May 2024 the unexecuted transfer (which differed from the version executed on 15 July 2024) was uploaded onto the Revenue NSW eDuties portal. As at this date, the terms of the Trust did not exclude a trustee from becoming a beneficiary of the Trust such that the requirements of section 54(3) of the Duties Act were not met. 

The terms of the Trust were amended on 24 June 2024 to ensure compliance with section 54(3) (and in turn s 104ZK(1)(a)) of the Duties Act. Notably, this date was before the date the transfer was executed but after the Chief Commissioner first learned about the proposed transfer as a result of the unexecuted transfer being provided on 24 May 2024.

On 26 June 2024 (before any transfer had been executed), the Chief Commissioner assessed the plaintiff to ad valorem duty of $93,055 and surcharge purchaser duty of $160,000 under Chapters 2 and 2A of the Duties Act (the Assessment).

The plaintiff objected to the Assessment on 2 August 2024, which was disallowed by the Chief Commissioner on 25 October 2024. The plaintiff then sought a review of the Assessment pursuant to section 97 of the Taxation Administration Act 1996 (NSW).

The Issue

The central issue in dispute was whether the Chief Commissioner’s construction of sections 12(2) and 12(4) of the Duties Act was correct. Specifically, whether an electronic registry instrument that has not been digitally signed is deemed to be executed when the Chief Commissioner first receives information relating to that instrument, such that a duty liability arises on that date, regardless of whether the instrument effecting the transfer has actually been executed.

Decision

The NSW Supreme Court found in favour of the plaintiff and ordered that the Assessment be revoked and that in its place the transfer of the Property on 15 July 2024 be assessed under section 54(3) with duty of $100.

Hmelnitsky J held that under the Duties Act, duty is imposed on dutiable transactions, not on the instruments by which they are effected (echoing the Court of Appeal’s decision in Chief Commissioner of State Revenue v Benidorm Pty Ltd [2020] NSWCA 285 (Benidorm)). Section 12(4) of the Duties Act applies where a transfer is effected by an instrument within the meaning of section 12(2); i.e. where that instrument is an electronic registry instrument. However, sections 12(2) and (4) do not cause an instrument which does not otherwise effect any dutiable transaction to become chargeable with duty.

Hmelnitsky J observed that if the Chief Commissioner’s construction were to be accepted, then any time the Chief Commissioner receives information about a proposed but unexecuted transfer in the form of an electronic registry instrument, the liability for duty would arise immediately, even if the instrument is only digitally signed at a later date. This would create an unlikely outcome in the context of the Duties Act as, if identical information about a proposed but unexecuted transfer in paper form were received, no liability would arise. The instrument provided on 24 May 2024 was merely an unexecuted transfer which did not effect a transfer of any dutiable property. 

His Honour emphasised that the process for determining when a liability for duty arises requires consideration of the actual dutiable transaction that occurs. Here, the transaction ultimately occurred by way of digital signing (as described in section 12(4)(a)). As such, the ‘otherwise’ in section 12(4)(b) did not come into effect, and for the purposes of section 12(2), the liability arose at the time of the digital signing.

Takeaways

As with Benidorm, this case reinforces the NSW Supreme Court’s view that Chapter 2 of the Duties Act is concerned with dutiable transactions, and not instruments. As such, when considering a dutiable transaction, particularly if there is a changing set of facts that would be relevant to the transaction (for example, whether the requirements for an exemption exist, or what property will be included within a landholder’s landholdings), it is imperative to look to the actual dutiable transaction that will occur, and determine based on that transaction the relevant point in time for ascertaining those facts.