- In brief
On 17th August 2016, with the introduction of the Duties Amendment (Landholder and Corporate Reconstruction and Consolidation) Bill 2016 into the Tasmanian parliament, Tasmania is set to:
- introduce a corporate reconstruction / consolidation duty scheme. The scheme provides a duty exemption for corporate group reorganisations within a corporate group (as defined). Previously, Tasmania offered only ex gratia relief in particular cases;
- replace the `land rich' regime with a landholder regime, and which will also extend duty to certain acquisitions of listed companies and public unit trusts.
The Bill heralds Tasmania moving into line with the other Australian States and Territories. The provisions will commence on the day the Bill receives Royal Assent.
Corporate reorganisations scheme
Broadly, the key characteristics of the scheme are:
- Provides a full exemption from duty.
- The meaning of the `corporate group' is largely in line with the other Australian jurisdictions with a 90 per cent `association' requirement and includes a unit trust scheme.
- There is a `pre and post association' requirement. The relevant members of the corporate group must be relevantly associated for 12 months prior to the duty event and for 12 months after the duty event.
- Application may not be made with the Commissioner of State Revenue before the duty event requesting confirmation of the availability of the exemption.
The landholder model
An indirect acquisition of an interest in land (such as by way of an acquisition of shares in a company or units in a trust) has traditionally been liable to duty in Tasmania only where the entity was `land rich'. The Bill removes the requirement that the entity is land rich.
The key characteristics of the landholder duty model are:
- The `land rich' test is removed (which required an assessment of the landholding entity's global land assets relative to its total eligible assets).
- A landholder duty event may arise where: o an interest
- of 50 per cent or more is acquired in a landholder which is a private company or private unit trust scheme or 90 per cent or more is acquired in a public company or public unit trust scheme, (i.e. a public landholder).
- the entity holds land (as defined) in Tasmania with a market value of $500,000 or more.
- `Land' is relevantly defined to include a thing that is `fixed to the land'. The Commissioner may not include the value of an item fixed to the land where he considers it would not be just and reasonable to do so.
- Where duty applies, it extends to Tasmanian land and certain goods.
- For public landholders, a concessional duty rate applies of 10 per cent of the general rate of duty.
- The Bill includes transitional provisions which require a consideration of historical acquisitions that span the date of Royal Assent.
The move to a landholder duty regime and the consequent removal of the land rich test is a welcome attempt to simplify the law. But a necessary consequence of the simplification is a broadening of the duty base. This, together with the low land threshold value of $500,000, means that care needs to be taken when dealing with any acquisitions of shares or units in an entity that holds (directly or indirectly) land in Tasmania. Particular consideration should also be had to any acquisitions that cross the date the landholder regime is enacted (on Royal Assent) in view of the transitional provisions.
Whilst we welcome the introduction of the corporate reorganisation regime, the inclusion of a `pre and post association' requirement means that some genuine, bona fide reorganisations may be delayed. Further, a `claw back' of the duty exempted is a real risk where a subsequent disposal of the relevant entity is contemplated. Planning for this will therefore be important.