- A recent decision of the Victorian Supreme Court confirms that public floats of property trusts holding land in Victoria are problematic from a stamp duty perspective.
Stamp duty on public float
Generally, a public float of a unit trust scheme does not give rise to a liability to duty in any Australian state or territory. This is because, in the usual case, no person acquires a percentage interest sufficient to result in a duty liability, and the float satisfies the criteria for a public float exemption where relevant.
The Victorian position
The above does not apply to the float of a Victorian land rich trust, a matter recently clarified by the Victorian Supreme Court’s decision in Challenger Listed Investments Ltd v Commissioner of State Revenue  VSC 464.
Prior to the Challenger decision, there was doubt about the possible application of section 89C of the Duties Act 2000 (Vic) to a public float. Based on the decision, a public float of a private unit trust scheme that is land rich in Victoria is likely to result in a duty liability if the float involves an interest of 20% or more in the trust, even if no person acquires an interest of 20% or more. This is an important exception to the general rule that Victorian land rich duty is chargeable on an acquisition by a person of an interest of 20% or more in a private unit trust scheme (aggregating interests acquired by associated persons and interests acquired under associated transactions—rules which usually do not produce an aggregated interest of 20% or more in the circumstances of a public float).
The Victorian position seems to indicate a departure from stamp duty policy to date (namely a policy of not imposing duty on public floats), although the court stated in the Challenger decision that the policy of section 89C was to impose duty on transactions where underlying ownership of land of a land rich entity is transferred through the change of status of the entity from private to public.
The Challenger decision
The Challenger decision concerned the 2006 float and ASX listing of the Challenger Diversified Property Trust 1 (CDPT1). Prior to the float, CDPT1 was a land rich private unit trust scheme all of the units in which were held by a Challenger entity as trustee of a trust (Old Holding Trust). The Old Holding Trust transferred units in CDPT1 to another trust within the Challenger group (New Holding Trust), and units in CDPT1 were issued to the public under a PDS. Consequently, 61% of the units in CDPT1 were held by the public, and the remainder held by New Holding Trust.
The Commissioner imposed duty on 100% of CDPT1’s Victorian landholdings, on the basis that CDPT1 converted from a private unit trust scheme to a public unit trust scheme, and section 89C of the Duties Act applied. The court accepted that section 89C would have applied, but for a technical argument unrelated, under current law, to the section 89C conversion point. That technical argument arose due to the Victorian Court of Appeal’s decision in Commissioner of State Revenue v Landrow Properties Pty Ltd  VSCA 197, where it was held that under the Duties Act as it stood at the relevant time, a trustee could not hold an ‘interest’ nor ‘acquire’ an interest under the land rich provisions. That technical argument is no longer available under the current Duties Act.
Implications for a public float under current law
Accordingly, it is now clear that the Victorian State Revenue Office will assess land rich duty on a public float of 20% or more of the interests in a land rich trust which holds Victorian land. Duty will be calculated at 5.5% on that proportion of the Victorian land which the units acquired by investors under the float (and by others such as cornerstone investors in the float context) represent of the total units on issue in the float vehicle.