Australia: NSW Broadens Stamp Duty Exemption for Corporate Reconstructions and Top-Hatting Transactions

Last Updated: 21 April 2012
Article by Peter Charteris and Eddie Ahn

This update provides a summary of the new corporate reconstructions and consolidations exemption from stamp duty in New South Wales (NSW).


On 11 April 2012, the State Revenue Legislation Amendment Bill 2012 (NSW) received Royal Assent. Amongst other changes, this Bill introduces a new "Corporate Reconstructions and Consolidations" exemption regime in Chapter 11, Part 1 of the Duties Act 1997 (NSW) (Duties Act). These provisions replace the existing exemptions for "corporate reconstructions" in section 281 of the Duties Act and "top-hatting" arrangements in section 163C of the Duties Act.

The key changes to the exemption provisions include:

  • An expansion of the existing top-hatting exemption for an acquisition of an interest in a landholder that is made as part of a corporate consolidation.
  • The removal of the 12-month "preassociation test" and 12-month "postassociation test" for corporate reconstructions, such that entities are no longer required to be members of the same corporate group for 12 months before and after the relevant transaction.

The changes take effect from 1 July 2012.

With the abolition of duty on business asset transfers in NSW from 1 July 2012, these changes will be most relevant for transactions involving the intra-group transfer of land assets or the top-hatting of NSW land-owning entities.


The new Chapter 11, Part 1 provides a duty exemption for:

  • Corporate reconstruction transactions
  • Corporate consolidation transactions.

Corporate reconstruction transaction

The corporate reconstruction transaction exemption generally replicates the existing exemptions in section 281 for the following transactions between corporations that are members of the same "corporate group":

  • A transfer, or agreement for sale or transfer, of dutiable property
  • A surrender of an interest in land
  • A vesting of dutiable property
  • An acquisition of an interest in a landholder
  • An application to register a motor vehicle as a result of a transfer of the vehicle between members of the same group.

Corporate consolidation transaction

The corporate consolidation transaction exemption extends the existing top-hatting exemption from landholder duty to transactions where a corporation is interposed between an existing landholder and its members. Previously, the exemption was only available for certain transactions involving the tophatting of a unit trust above stapled entities, which satisfied the requirements for a particular capital gains tax relief (or roll-over) in the income tax legislation.

Under the new provisions, the corporate consolidation transaction exemption applies to an acquisition in a NSW landholder that meets the following requirements:

  • A corporation is interposed between a landholder and the holders of the landholder's shares or units, and
  • Is either an acquisition of shares or units in:
  • The landholder by the interposed entity, provided that the only consideration given by the interposed entity is the issue or transfer of shares/units in itself to the relevant shareholder or unitholder; or
  • The interposed entity, by a shareholder or unitholder of the landholder (ie the subsequent issue of shares/units to the existing shareholder or unitholder).

In addition, the following conditions must also be satisfied:

  • The new interposed entity cannot hold any dutiable property or an interest in a corporation immediately before the acquisition.
  • Immediately following the issue or transfer of the interposed entity's shares/units:
    • Each person who holds those shares/units is a person who held shares or units in the landholder immediately before the transaction (ie no other shareholders/unitholders in the interposed entity); and
    • The proportion of those shares/units held by each hareholder/unitholder is the same as the proportion of the shares or units that they held in the landholder before the transaction.

Corporate group and other requirements

For both exemptions, the term "corporations" include unit trusts, as well as companies and other bodies corporate.

A corporate group consists of a parent corporation and its subsidiaries. These terms generally accord with the existing terms in Revenue Ruling DUT 26; that is, a "parent corporation" is a corporation that owns, directly or indirectly, at least 90% of the shares or units in another corporation (being the "subsidiary") and has voting control over the subsidiary.

In addition, the new rules expand the definition of "corporate group" for stapled entities. Previously, only stapled entities that were listed on the Australian Securities Exchange were treated as members of the same corporate group. Under the new rules, the listing requirement has been removed such that both listed and unlisted stapled entities (and their subsidiaries) may be treated as members of the same corporate group, thereby extending the scope of the exemption.

Importantly, corporations are no longer required to be members of the same corporate group for at least 12 months prior to the transaction. Similarly, the requirement that corporations be members of the same corporate group for at least 12 months following the transaction has also been removed. This will provide taxpayers with greater flexibility in NSW in obtaining the exemption.

In addition, under the transitional rules, transactions for which the corporate reconstruction exemption has already been obtained under the existing provisions in section 281 will have the 12 month post-association test automatically expire on 1 July 2012.

For the corporate reconstruction exemption to be available, the Commissioner must be satisfied that the transactions are undertaken for the purpose of changing the structure of the group or the holding of assets within the group. In addition, as an antiavoidance measure, the transactions cannot be undertaken for the purpose of reducing duty or other taxes in Australia (eg federal income tax).

Application for exemption

As with the previous exemptions, the duty exemptions under Chapter 11, Part 1 do not apply automatically. Pursuant to section 273F, an application for the exemption must be made to the Chief Commissioner of State Revenue in the approved form within five years after the liability date for the relevant transaction.

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