By Damian Roe, Associate; Hannah Byrne, Solicitor
The Queensland Government has announced significant changes to the duty treatment of transactions involving resources exploration tenements in the State.
Under reforms announced in the 2011-2012 Mid Year Fiscal and Economic Review, duty could now be payable on the acquisition of exploration tenements or of shares in companies that own exploration tenements.
Here, associate Damian Roe and solicitor Hannah Byrne discuss what these changes mean for companies acquiring exploration tenements in Queensland.
Summary of key points
- Under the Queensland Government's 2011-2012 Mid Year Fiscal and Economic Review, legislation will be enacted to change the definition of 'land' and 'statutory licence' under the Duties Act 2001 (Qld) to include resources exploration tenements. This change will have retrospective effect and will apply from 10.30am on 13 January 2012.
- Duty based on a sliding scale of up to 5.25 percent could now be payable on the acquisition of an exploration tenement, whether the tenement is acquired directly, or indirectly through the acquisition of shares in a corporation that owns an exploration tenement.
Changes to the definition of land under the Duties Act
Previously, the definition of land under the Duties Act, which applies to both transfer duty and landholder duty, specifically excluded resources exploration tenements.
The Government is now proposing to introduce legislation that will include the following exploration tenements in the definition of land:
- Prospecting and exploration permits under the Mineral Resources Act 1989 (Qld)
- Authorities to prospect under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) and Petroleum Act 1923 (Qld)
- Geothermal exploration permits under the Geothermal Exploration Act 2004 (Qld)
- Greenhouse gas exploration permits under the Greenhouse Gas Storage Act 2009 (Qld)
Impact of the changes
The Duties Act imposes duty on transfers of dutiable property, agreements to transfer dutiable property, partnership acquisitions and trust acquisitions (where the partnership or trust holds dutiable property).
The Duties Act defines dutiable property to include land in Queensland. Accordingly, these changes will not only apply to agreements for the transfer of exploration tenements, but also to acquisitions of interests in partnerships or trusts that hold such tenements. They are also likely to apply to joint ventures and farmin agreements.
The Duties Act also imposes landholder duty on the acquisition of shares in a corporation, or units in a listed unit trust, that has landholdings in Queensland with an unencumbered value of $2 million or more.
The Queensland Government's announcement also indicates that exploration tenements will be included in the calculation of an entity's landholdings for the purposes of landholder duty.
This means that significant duty could now be payable on the acquisition of shares in a company that holds exploration tenements.
Timing of the changes
These changes apply to transfers or agreements for the transfer of exploration tenements made or entered into at or after 10.30am on 13 January 2012.
The Government has updated the factsheet it initially released to confirm that the changes will not apply to agreements to transfer exploration tenements or acquire an interest in a landholder entered into before that time, even where the transfer is completed after that time.
The Queensland Government's full 2011-2012 Mid Year Fiscal and Economic Review and the Treasurer's statement on the changes can be viewed online. No further details have been released at this time. However, we will continue to monitor the changes and will provide more information as it comes to hand.
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