NSW Supreme Court Confirms That A Prior Acquisition In A Public Landholder Is Not To Be Disregarded Where A Subsequent Acquisition Occurs

The NSW Supreme Court has handed down its decision in ISPT Pty Ltd (ACN 064 041 283) as Trustee of ISPT Retail Australia Property Trust (FSREC Fund) v Chief Commissioner of State Revenue [2026] NSWSC 424, dismissing the taxpayer's summons and upholding an assessment of landholder duty disallowed on objection by the Chief Commissioner.

The dispute arose from ISPT's acquisition of a 19.46% interest in a private landholding unit trust scheme known as Fort Street Real Estate Capital Funds (FSREC) on 22 July 2022 (July acquisition). The issue was whether this acquisition should be aggregated with ISPT’s pre-existing 75.8% interest in FSREC which was acquired on 18 February 2022 (February acquisition) whilst FSREC was a public landholder (on the basis it was a widely held trust). If it should be aggregated, ISPT also sought for the duty assessed to be reduced having regard to the ‘not just and reasonable’ concession.

The case is important as:

• it confirms that, for the purposes of the aggregation provisions in s 155(3) of the Duties Act 1997 (NSW) (Duties Act), the status of a landholder at the time of a prior acquisition is irrelevant. The critical question is whether the landholder is a private landholder at the time of the relevant acquisition — the "acquisition" referred to in s 152(3)(a) captures interests acquired in the landholder during the statement period regardless of whether the landholder was private or public when those prior interests were acquired;
• it is a significant reminder for investors acquiring interests in public landholders (including widely held unit trust schemes) that prior acquisitions within the 3-year statement period will be aggregated when assessing landholder duty on a subsequent relevant acquisition, even if those prior acquisitions attracted no duty at the time they were made; and
• it highlights the narrow scope of the dispensing power under s 163H of the Duties Act, which the Court declined to exercise on the basis that the aggregation outcome was neither unjust nor unreasonable having regard to the policy intent of the landholder duty rules (which are no longer limited to being anti-avoidance in nature).

The Issues

The issues for determination were:

1. whether s 155(3) of the Duties Act required aggregation of the February and July acquisitions in calculating the landholder duty payable on the July acquisition; and
2. if so, whether the discretion under s 163H of the Duties Act should be exercised to grant ISPT an exemption from duty in respect of the February acquisition.

Background

FSREC

FSREC comprised three stapled unit trusts: Fort Street Real Estate Capital Fund I, II and III.

At all relevant times the assets of FSREC included interests in land in NSW, with an unencumbered value of $380 million as at 30 June 2022.

Immediately prior to the February acquisition, FSREC was a "widely held trust" (with more than 3,000 unitholders, none of whom individually or together with associated persons held more than 20% of the units in FSREC) and therefore a public landholder under s 146 of the Duties Act.

The February acquisition

By a deed dated 16 December 2021, ISPT agreed with the responsible entity to subscribe for between $240-$320m for units in FSREC. One of the conditions of this transaction was that existing members of FSREC accept an offer by the responsible entity to redeem units in a withdrawal offer to a value at least equal to the minimum amount to be subscribed by ISPT (First Withdrawal Offer).

On 18 February 2022, following the redemption of units by existing members, new units in FSREC were issued to ISPT equivalent to 75.8% of all units on issue (being the February acquisition). Following the redemption, more than 3,700 members remained in FSREC.

As a result of the February acquisition, FSREC was no longer a "widely held trust" (ISPT now being entitled to more than 20% of the units), and became a "private unit trust scheme" and therefore a private landholderwithin the meaning of s 146 of the Duties Act.

It was common ground that the February acquisition was not itself a relevant acquisition as it was an acquisition of less than 90% in a public landholder and therefore did not meet the threshold for a significant interest under s 150(2) of the Duties Act.

The July acquisition

On 22 July 2022, following a second withdrawal offer open to all members excluding ISPT, the responsible entity simultaneously redeemed 48,045,278.61 units held by existing members and issued an equivalent number of new units to ISPT, representing a further 19.46% of the total units on issue (the July acquisition).

Following the July acquisition, ISPT held a total of 95.26% of the units in FSREC.

The assessment

On 16 February 2024, the Chief Commissioner issued an assessment to ISPT, assessing liability of $19,893,540 based on the cumulative interest of 95.26% of the value of FSREC's NSW landholdings, being the combination of the 19.46% interest acquired in the July acquisition and the 75.8% interest previously acquired in the February acquisition. The Chief Commissioner did so on the basis that s 155(3) of the Duties Act required the charging of duty on the "aggregate of amounts severally calculated ... in respect of each interest required to be disclosed in the statement". 

ISPT had initially estimated duty payable of $4,051,340, arising out of the July acquisition alone. The Chief Commissioner also assessed interest of $2,419,759.65 in respect of the shortfall, which was reduced to $739,175.36 on condition that the outstanding amount of duty was paid before 8 March 2024.

Relevant statutory provisions

Under s 150(2) of the Duties Act, a person has a "significant interest" in a private landholder where that person would be entitled to 50% or more of the property distributed on a winding up, and 90% or more in the case of a public landholder.

The charging provision where a relevant acquisition has occurred is s 155 in the case of a relevant acquisition in a private landholder and s 156 in the case of a relevant acquisition in a public landholder. In summary:

• If the acquisition statement does not disclose "any other acquisitions in the statement period", duty is payable at the general rate on a dutiable amount determined by multiplying the unencumbered value of all the land holdings and goods of the landholder in NSW (calculated as at the date of the relevant acquisition) by the proportion of that value represented by the "interest acquired" in the relevant acquisition: s 155(1).
• If, on the other hand, the acquisition statement discloses "one or more other acquisitions in the statement period", duty is payable at the general rate on "the aggregate of amounts severally calculated in accordance with s 155(1) in respect of each interest required to be disclosed in the statement": s 155(3).
• The "statement period" is the period of 3 years immediately preceding the date of the relevant acquisition: s 152(5).
• In the case of a relevant acquisition in a public landholder (being an acquisition of 90% or more), duty is payable at a concessional rate of 10% of the duty which would be payable at the general rate on a transfer of all the land holdings and goods of the landholder in NSW, and no further duty is payable "in respect of any further acquisition made by that person in that landholder": s 156(1) and (5).

Issue 1: Is the February acquisition required to be aggregated under s 155(3)?

ISPT's argument

ISPT submitted that the reference to "other acquisitions" in s 155(1) and "one or more other acquisitions" in s 155(3) must be read as referring to "other acquisitions in a private landholder" during the statement period. ISPT argued that the phrase "other acquisitions during the statement period" should be construed by the earlier reference to "relevant acquisition in a private landholder" in s 155(1). Because FSREC was a public landholder at the time of the February acquisition, that acquisition was not, on ISPT's construction, a relevant "other acquisition" to be aggregated under s 155(3). Accordingly, s 155(1) applied and duty should be assessed on the 19.46% July acquisition alone.

The Court's reasoning

The Court rejected ISPT's construction for the following reasons:

• Statutory text: The word "acquisition" in Ch 4 is used to refer to the acquisition of an interest in a landholder regardless of whether the landholder is private or public at the time of the acquisition. The status of the landholder as private or public at the time of an acquisition is only relevant to the threshold for a significant interest and the manner of calculating duty payable on a relevant acquisition.
• Section 152(3)(a): Sections 152(3)(a) and (6) – the provisions specifically addressing disclosure of information about acquisitions in the statement period – do not say that acquisitions during the statement period are only required to be disclosed if the landholder was a private landholder when they occurred. Where the landholder is a private landholder at the time of the relevant acquisition, s 152(3)(a) requires disclosure of the unencumbered value of landholdings and goods "as at the date of acquisition of each interest acquired in the landholder during the statement period" — the focus is on the landholder as an entity (unit trust scheme, private company, or listed company), not on its classification as private or public at the earlier time.
• Exempt acquisitions: Section 163A(1)(k) of the Duties Act provides an exemption from aggregation specifically for "an interest in a public landholder acquired before 1 July 2009". The deliberate limitation of this exemption to pre-1 July 2009 interests implies that interests in a public landholder acquired after 1 July 2009 (where s 156 did not apply) are not otherwise exempt from aggregation. ISPT's construction would effectively confer an exemption in circumstances where, it may be inferred, Parliament chose not to do so.
• Mertune's case: Smart J's decision in Mertune Pty Ltd v Chief Commissioner of Stamp Duties (1994) 35 NSWLR 636 under the predecessor legislation (which had held that the critical date for determining whether the entity was a "designated landholder" for aggregation purposes was the date of the relevant acquisition, not the date of the prior acquisition) supported the same construction of s 155. Parliament's re-enactment of substantially similar provisions in the Duties Act after Mertune gives rise to a presumption that the provisions were intended to bear the same meaning.
• Anti-avoidance: ISPT's construction would create an obvious avoidance opportunity. Specifically, an acquirer could deliberately acquire 89% of a public landholder (just below the 90% threshold, thereby converting it to a private landholder) and then acquire a further interest with duty calculated only on that small subsequent acquisition. The resulting duty could be minimal despite the acquisition of a large stake, and would substantially undercut the evident legislative design of s 155(3) to treat multiple acquisitions in the same landholder within the statement period as part of a single economic acquisition.

Conclusion on Issue 1

The Court rejected ISPT's contention that s 155(1) was the applicable charging provision and confirmed that s 155(3) applied, requiring the aggregation of each interest required to be disclosed in the acquisition statement — being both the 75.8% February acquisition and the 19.46% July acquisition.

Issue 2: Should the s 163H discretion be exercised?

The discretion

Part 4 of Ch 4 includes s 163H, which confers a discretion on the Chief Commissioner (and on the Court on de novo review under s 97 of the Taxation Administration Act 1996 (NSW)) to grant a full or partial exemption from duty "if satisfied that the application of [Ch 4] to an acquisition in a particular case would not be just and reasonable".

The purpose of s 163H, as explained by Emmett AJA in Winston-Smith v Chief Commissioner of State Revenue [2018] NSWSC 773 at [49] and accepted by the Court of Appeal on appeal, is "to enable the Commissioner to relieve a taxpayer from the duty consequences attaching to a relevant acquisition in circumstances where Ch 4 brings within its operation an acquisition that Ch 4 was not intended to capture”.

The Court's reasoning

The Court declined to exercise the discretion, for the following reasons:

• The aggregation of the February and July acquisitions was consistent with the intended operation of Ch 4, not an unintended consequence. It resulted in duty being payable on each acquisition in a manner reflecting the amount and value of the interest acquired in the underlying land holdings and goods of the landholder in each successive acquisition.
• ISPT had available means of structuring the transaction to avoid the outcome. ISPT could have maintained the February acquisition at less than 20% (preserving FSREC's public landholder status), structured it as a 90%+ acquisition to engage the s 156 concessional rate, or waited more than three years between the two acquisitions such that the February acquisition fell outside the statement period. 
• Having had the benefit of FSREC's public landholder status (in the sense of being able to acquire a 75.8% interest in FSREC without any duty being imposed), it was not unjust or unreasonable for further acquisitions to be taxed under Ch 4 in the same way as if the unit trust scheme had been a private landholder from the outset. ISPT had had the benefit of the only part of the concession which applied to it (being the higher 90% threshold), and having had that benefit it could not now contest being taxed at the full private landholder rate on subsequent acquisitions.
• ISPT failed to adduce any evidence that it was unaware of the duty implications of its acquisition strategy. The landholder provisions have been in place since 2009. The potential for aggregation of acquisitions within the statement period is clear, and a well-resourced commercial operator ought to have been aware of the consequences.

Conclusion on Issue 2

For the above reasons, the Court ordered that the summons be dismissed with costs.

It is unclear at this stage whether there will be a further appeal of the decision.