"Land-rich" duty to be replaced with
"landholder" duty model
Last week's 2011/2012 Victorian State Budget announcements
have signalled a change to tax provisions relating to transfers of
ownership or control of entities which hold land.
Under the current model, an entity is "land-rich"
it has landholdings in Victoria with a value of A$1 million or
all of its landholdings (wherever located) comprise 60% or more
of the total value of its assets; and
it is a Victorian private company, a private unit trust scheme
or a wholesale unit trust scheme.
If an interest in a large share of a "land-rich"
entity is acquired in certain ways (through a purchase, for
example), stamp duty is imposed in respect of the transaction. This
"land-rich" duty operates as a tax on the indirect
purchase of land.
The Budget announcement has foreshadowed the adoption of a new
"landholder" duty model to replace the current model, and
anticipated to commence on 1 July 2012.
The Victorian Government is seeking to ensure that the stamp
duty base is widened by:
altering restrictions on which entities the duty will relate
imposing the new landholding duty on transactions which give
effect to changes in ownership or control of entities holding
No further details of the proposal were specified, but it is
likely that Victoria will mirror the recent changes made around the
country, resulting in:
abolition of the 60% threshold requirement for
"land-rich" entities; and
reliance on a threshold landholding value (which is yet to be
announced) as a key trigger for the duty.
If Victoria follows suit with the adoption of the new
"landholder" duty model, the level of the threshold
landholding value is a key point to watch, as it may move from the
current A$1 million level.
Similar landholder duty models have been adopted in Western
Australia, New South Wales, the Northern Territory and the
Australian Capital Territory, and are pending introduction in South
Australia and Queensland. The reform should result in greater
national uniformity in this area of law.
Implications of the new model
As the duty criteria will be widened, more transactions are
likely to be subject to the new landholder duty.
This has potential implications for those who are likely to
acquire interests in the whole or part of any landholding entity on
and from 1 July 2012, and should be taken into account when
entering into such transactions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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