The South Australian State Budget for the 2015-16 year (released on 18 June 2015) announced significant and wide reaching stamp duty changes which will affect businesses operating, or holding assets, in South Australia.
Although the legislation to give effect to the budget (the Bill) has not yet been publicly released, published material provides that under the budget, transfer duty has been, or will be, abolished in respect of the following:
- transfers of non-quoted marketable securities;
- non-real property transfers;
- transfers of units in a unit trust; and
- non-residential non-primary production real property transfers.
In addition, the criteria to qualify for corporate reconstruction exemption relief have been changed significantly and the stamp duty concession for mining tenements has been expanded.
There are also changes to the landholder duty regime. Although the $1 million threshold to be a land holding entity in South Australia is to be abolished, the asset classes which will qualify an entity as a land holding entity are to be narrowed. Companies and unit trusts with any South Australian landholdings (and investors in such entities) should consider how these changes might impact them.
Certain changes will be made to the Land Tax Act to counteract certain trust structures which prevent land from being aggregated for land tax purposes. This measure will apply to trust structures irrespective of when the structures were created.
Non-quoted marketable securities (abolished 18 June 2015)
Stamp duty on non-quoted marketable securities (“share transfer duty”) will be abolished from 18 June 2015.
This change will bring South Australia in line with almost all of the other jurisdictions in Australia, and will leave New South Wales as the last state to levy share transfer duty on taxpayers. New South Wales has currently legislated to also abolish share transfer duty from 1 July 2016.
Where a share transfer is entered into pursuant to a share sale agreement dated between 18 June 2015 and the date of the Bill’s assent, ex-gratia relief will be available.
Non-real property transfers (abolished from 18 June 2015)
Stamp duty on non-real property transfers will be abolished from 18 June 2015. Non-real property comprises property that is not land and buildings and therefore includes:
- plant and equipment that is not fixed to land;
- intellectual property and goodwill;
- receivables; and
- certain statutory leases and licences.
As with share transfer duty, ex-gratia relief will be available for any duty imposed on non-real property transactions entered into between 18 June 2015 and the date of the Bill’s assent.
Units in unit trusts (partially abolished from 18 June 2015, completely abolished from 1 July 2018)
From 18 June 2015, stamp duty on the issue, redemption and transfer of units in a unit trust will only be payable where the unit trust holds land in South Australia. This liability to duty will be abolished entirely from 1 July 2018.
Dealings in unit trusts may still attract duty under the landholder duty provisions.
Non-residential non-primary production real property transfers (to be phased out from 1 July 2016 - 1 July 2018)
Stamp duty on non-residential non-primary production real property transfers will be phased out gradually starting from 1 July 2016. Currently, this head of duty is levied at rates of up to 5.5%. Duty rates are to be reduced by a third from 1 July 2016, a further third from 1 July 2017 and are to be abolished from 1 July 2018. This measure is accompanied by an anti-avoidance provision to prevent artificial structuring of transactions to take advantage of future lower rates of duty.
Real property will include estates or interests in land, mining tenements, certain pipelines, options and rights to acquire an interest in land, anything fixed to land and goods that have a significant connection with transferred land. From 1 July 2018, with limited exceptions, duty will only be imposed on the interests in relation to residential and primary production land.
Businesses should be wary that vacant land may be classified as being for residential purposes depending on the zoning of the area and other information provided to the Commissioner by the Valuer-General.
Corporate reconstruction relief (modified criteria from 18 June 2015)
Until now, stamp duty relief for an intra-group transfer of dutiable property has been provided by way of ex-gratia relief from the Minister for Finance pursuant to an administrative scheme (see Circular 227). From 18 June 2015, this will be replaced with a legislative regime.
Under the new regime, if the Commissioner of State Taxation is satisfied that the legislative criteria apply to a transaction, the Commissioner must exempt that transaction from duty. The updated legislative criteria will bring South Australia’s corporate reconstruction exemption into line with most other jurisdictions. Under the new rules, there are no longer requirements:
- that “substantially all” of the assets of the transferor have to be transferred;
- that the transferor and transferee have to be members of the same corporate group for 3 years prior to, and post, the transfer; or
- that the assets remain in the group for 3 years after the transfer.
The requirement that applications for corporate reconstruction relief be made any time before, and up to 1 year after, the transaction has been retained. If the Commissioner revokes the exemption, the Commissioner has a discretion to impose interest and penalties as if the failure to pay duty at the date of the transaction was a tax default.
Mining tenements (concession from 18 June 2015)
From 18 June 2015, transfers of retention tenements will receive the same concessional stamp duty arrangements that apply to transfers of exploration tenements. Eligible transfers will now only give rise to a stamp duty liability of up to $1,000 rather than the duty rates that would normally apply.
No stamp duty will be payable on transfers of mining licenses and tenements from 1 July 2018, consistent with the phased abolition of stamp duty on non-residential non-primary production real property transfers.
Removal of $1 million landholder threshold (from 1 July 2018)
The current landholder duty regime only applies to companies and unit trusts that have $1 million or more of South Australian land assets. The $1 million landholder threshold will be removed from 1 July 2018.
This change coincides with the complete abolition of stamp duty on non-residential non-primary production real property transfers. Therefore, from 1 July 2018, landholder duty is only to apply in relation to an entity holding South Australian residential or primary production land assets.
Land Tax Act changes (from 1 July 2015)
The current provisions in the Land Tax Act have allowed taxpayers to benefit from certain trust structures which would prevent land from being assessed on an aggregated basis. From the 2015-16 financial year, the Commissioner will have the power to disregard minor interests that are created by trust structures. Although this measure will only take effect, and impact assessments, from 1 July 2015, the Commissioner will be able to review all trust structures, irrespective of when they were created.
Other changes to the Land Tax Act include clarifying that the Commissioner may disregard certain interests held in land from the time that those interests were created. This measure may affect assessments retrospectively as far back as the 2008-09 financial year.
Who does this affect?
All parties that do business, or own assets, in South Australia.
What do you need to do?
Taxpayers should review their current and proposed transactions to determine whether any stamp duty relief may be available. Entities that invest in South Australian land through trust structures should review their structures to determine whether the changes to the Land Tax Act affect them.