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The move from a land rich model to a landholder model
has broadened the duty base in Victoria with no corresponding
trade-off.
The Duties Amendment (Landholder) Act 2012 came into operation
on 1 July 2012. It introduces a landholder duty model in lieu of a
land rich model in Victoria. While in many respects this has bought
Victoria into line with other Australian States and Territories,
there are some significant differences.
The Act implements the following key changes to the assessment
of duty on acquisitions of interests in landholders in
Victoria:
Listed companies and listed unit trust schemes now
landholders
In addition to private companies, private unit trust schemes and
wholesale unit trust schemes ("private
landholders"), listed companies and listed unit trust
schemes ("public landholders") are now
considered "landholders" if their total land holdings in
Victoria have an unencumbered value of $1 million or more.
Accordingly, the acquisition of a relevant interest in a listed
company or listed unit trust scheme which is a landholder will now
result in the imposition of duty on the person acquiring that
interest.
Landholder model instead of land rich model
Before 1 July 2012, a landholder had to:
hold land in Victoria with an unencumbered value of $1 million
or more; and
have total landholdings (whether within or outside of
Australia) with a value of at least 60% of the total value of the
landholder's assets,
for duty to be assessed on the acquisition of a relevant
interest in that landholder.
This meant that the acquisition of a relevant interest in a
landholder would only be dutiable if the landholder was "land
rich" (ie. the landholder met the 60% threshold test).
However, the Act has removed the land rich test. Accordingly, a
landholder need now only hold land in Victoria within an
unencumbered value of $1 million or more for an acquisition of an
interest in it to be potentially subject to duty.
This change has resulted in a broadening of the duty base in
Victoria with no corresponding trade-off. While there had been
calls to increase the $1 million threshold to $2 million as a means
of offsetting the broader tax base, these calls have remained
unanswered by the Act.
New acquisition thresholds for public landholders
For the acquisition of an interest in a landholder to be
dutiable, there must be a "relevant acquisition" in that
landholder. Generally speaking, a "relevant acquisition"
occurs if, as a result of a transaction or series of associated
transactions, a person (or any associate of that person) acquires
an interest in a landholder in excess of the relevant acquisition
threshold for that landholder.
All associated transactions are now taken into account for the
purposes of determining whether an acquisition threshold has been
reached (not just those in any three year period). However, duty is
still only assessed on acquisitions made within a three year
period.
Acquisition thresholds for private landholders remain unchanged
by the Act. They are an acquisition of an interest of:
20% or more in a private unit trust scheme; and
50% or more in a wholesale unit trust scheme or private
company.
Given that listed companies and listed unit trust schemes can
now be landholders, it was necessary for the Act to prescribe new
acquisition thresholds for those landholders. Accordingly, the
acquisition of an interest of 90% or more in a public landholder
will now constitute a "relevant acquisition" for the
purposes of assessing duty.
It is worthwhile to note that, although many other Australian
States and Territories have adopted a landholder duty model, most
of those States and Territories have legislated to introduce a 50%
across the board acquisition threshold for private landholders (the
Australian Capital Territory being the only exception). It is
unclear why an increased threshold was not applied for private unit
trust schemes in Victoria to offset the broader duty base that now
exists as a result of the passing of the Act.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
Persons listed may not be admitted in all states and
territories.
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