Various States of Australia impose landholder duty (a type of stamp duty) on the transfer of units or shares in a landholder entity.
In Victoria, landholder duty can apply where a person makes a relevant acquisition in a unit trust or company that has landholdings in Victoria of more than $1M.
A relevant acquisition can occur where a person makes an acquisition:
(i) that itself constitutes a significant interest (defined as an acquisition of an interest of at least 20% of the units in a unit trust or 50% of the shares in a private company), or
(ii) that amounts to a significant interest in the unit trust or company when aggregated with prior acquisitions made by the person, or
(iii) after already holding a significant interest in the unit trust or company.
The scope of (ii) and (iii) above is extremely wide and can result in acquisitions of less than the 20% threshold (for unit trusts) or 50% threshold (for private companies) triggering landholder duty for the purchaser of those interests.
However, for acquisitions that could otherwise be subject to landholder duty based on (ii) or (iii) above, a couple of concessions embedded within the landholder provisions should be considered:
- Section 78(5) of the Duties Act effectively excludes certain interests already held in the entity. Section 78(5) states that in determining whether a relevant acquisition has been made, interests already held by the purchaser in the landholder are ignored if the interest was acquired prior to 15 November 1987, or the interest was otherwise acquired at a time when the landholder did not hold land in Victoria.
For example, often a unit trust will be established and a person will acquire their initial unitholding prior to the time that landholdings are acquired by the trust or nominated to the trust. In this instance, unless the subsequent acquisition by the unitholder itself constitutes a significant interest (i.e. an acquisition of at least 20% of the units in the unit trust), landholder duty will not apply to the subsequent acquisition made.
- While (ii) above aggregates prior acquisitions to determine whether an interest subsequently acquired amounts to a significant acquisition, section 86(3) of the Duties Act states that only the current acquisition and acquisitions made in the prior 3 years form part of the calculation of landholder duty payable by the taxpayer.
If you have any further questions relating to the above, please do not hesitate to contact Tim Olynyk on (03) 9810 0700 or at email@example.com.