Since 1 July 2012, any new arrangement involving a landholding company or unit trust may involve large amounts of unexpected duty.

From that date where a company or unit trust holds Victorian land valued at $1,000,000 or more, and the company or unit trust enters into an arrangement which changes the entitlement to participate in dividends, income, rent, profits, capital growth or the proceeds of sale of land then a hefty duty liability may arise.

There does not need to be any change in share or unitholding or the rights attached to shares or units in order for the duty liability to arise.

As an example, consider a typical property development scenario. A land holding company or unit trust does not have the skills to develop its land. It enters into an arrangement with an experienced property developer to develop the land. After payment of all costs they agree to share profits 50/50.

Under the law prior to 1 July 2012, there was no duty liability arising under the arrangement between the land holding company or unit trust and the property developer. On and from 1 July 2012 this arrangement likely attracts duty.

This form of duty does not apply to land held in a discretionary trust or to land held by a natural person.