On 21 November 2008, the Victorian Government issued a media release announcing that it had moved to close a loophole which allowed the use of complex long-term lease arrangements to escape stamp duty liability. The changes take effect immediately. However, the media release provides little detail as to the exact types of long-term leases that are affected.
What types of long-term leases are affected?
The media release provides that "long-term lease schemes allow a small number of parties to use and control leased land equivalent to ownership without having to pay the appropriate stamp duty" and that effectively "a purchaser can acquire rights which are equivalent to ownership but not pay duty".
The media release provides that "typically these arrangements are used at the top end of the property market" and that the changes "will not affect those entering into ordinary commercial leases".
The media release does provide that the changes will bring Victoria closer into line with other jurisdictions.
However, the media release provides no further detail on the types of long-term leases that will be affected. Questions that are left unanswered include:
- What length of lease term (e.g. 50 years or 99 years?) will be required for a lease to qualify as a long-term lease?
- How will options to renew be treated?
- Will the changes only apply to leases with a lease premium or where the rent has been pre-paid?
- Will the changes apply to Crown leases?
When do the changes take effect?
The Government states in the media release that legislation to affect the changes will be introduced during the current session of Parliament and that the changes will take effect immediately from the date of the media release. Given next week is Parliament's last sitting week this year, legislation can be expected to be introduced next week, but is unlikely to be passed until Parliament resumes sitting next year.
Who could be affected by the changes?
Property developers using long-term lease structures are likely to be affected by the changes.
Depending on the extent of the changes, retirement village and aged care facility operators may also be affected. Residents are commonly given tenure through long-term lease arrangements. Likewise, operators of such facilities are commonly provided with rights to communal facilities through long-term lease arrangements.
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