New corporate reconstruction relief rules in NSW
New corporate reconstruction relief rules have been in place in New South Wales since 1 July 2012. The new rules are less stringent. Importantly, they do not contain any pre–or post–transfer association requirements. New South Wales and Western Australia are now the two States to have adopted this approach. Elsewhere in Australia (except for Tasmania where no such exemption applies), post-transfer requirements can apply for up to three years following a corporate reconstruction exemption transaction.
Victorian landholder duty model now in place
On 1 July 2012, Victoria moved from the land rich duty model to the landholder duty model.
The key points about the Victorian landholder duty provisions are as follows.
- The provisions apply to a ‘landholder’, ie a company or unit trust with landholdings in Victoria with an unencumbered value of $1 million or more. The definition of land has been expanded considerably.
- Duty is payable at rates of up to 5.5% on an acquisition of an interest of 20% or more in a private unit trust, or 50% or more in a wholesale unit trust or an unlisted company.
- Duty is payable at an effective rate of 0.55% on an acquisition of an interest of 90% or more in a public unit trust or a listed company (although full rates of up to 5.5% may apply if the entity has been a public landholder for less than 12 months). The same rate of duty also applies on conversion of a private unit trust to a public unit trust (eg IPO and ASX listing) and on the listing of a company.
- A new provision imposes duty when a person acquires an economic entitlement of 50% or more. ‘Economic entitlement’ is a very broad concept. It is defined as an arrangement in relation to a private landholder under which a person is entitled to dividends or income of the landholder, to participate in the income, rents, profits, capital growth or sales proceeds of the landholder’s landholdings, or to receive any amount determined by reference to the foregoing.
- A welcome change is the introduction of more lenient registration requirements for wholesale unit trusts. The definition of qualified investor now extends to listed companies, government agency owned entities which are primarily used for meeting statutory government liabilities or obligations, and certain approved foreign equivalents. Further, a trust only needs to have 70% or more qualified investors to be eligible for registration as a wholesale unit trust (previously, this requirement was 80% or more).
Australian Capital Territory landholder duty changes
In another welcome move, the ACT government has amended its landholder duty provisions so that private unit trusts, wholesale unit trusts and private companies are treated in the same way. The dutiable acquisition threshold in these entities is now an acquisition of an interest of 50% or more. Previously, the threshold was 20% or more for a private unit trust.
Recap: landholder duty and equivalent rules Australia-wide
By way of summary, the landholder duty and equivalent regimes which now apply in the Australian States and Territories are as follows.
- All jurisdictions other than Tasmania have a landholder model. Under this model, an entity is a landholder if it has landholdings in the relevant jurisdiction satisfying a value threshold (eg $2 million or more in New South Wales). The formerly applicable ‘percentage threshold’ no longer applies under the landholder model, so the model brings more entities within the duty net and more closely aligns the duty treatment of a share or unit transaction with a transaction involving the underlying assets of the entity.
- Tasmania still has the land rich model (retaining the 60% land to total property threshold).
- Listed landholder duty is now in place in all jurisdictions, other than in Tasmania and the ACT. Generally the provisions apply in a takeover context where a person acquires an interest of 90% or more in an ASX listed target. Usually, listed landholder duty is charged at a concessional rate (of up to 0.55% in NSW, Victoria, Queensland and South Australia), but in Western Australia and the Northern Territory the usual land transfer rates apply (up to 5.45%).
- The dutiable acquisition threshold under landholder and land rich provisions is 50% or more for unlisted entities Australia-wide, with the exception of the 20% or more dutiable acquisition threshold in Victoria for private unit trusts. In addition, Queensland and South Australia have more strict rules applying to trusts under which any acquisition (no matter what size) may be dutiable.
- Landholder duty is payable by reference to the gross market value of land in most jurisdictions. Goods are also included in the duty base in some jurisdictions.
Rates increases and deferral of abolition of certain duties
The top transfer duty rate in Australia is now 7.25%. This rate applies in the ACT for properties over $1 million, and has been in place since 6 June 2012. Tasmania is also scheduled to increase it top transfer duty rate, from 4% to 4.5%, on 1 October 2012.
The NSW government has deferred until 1 July 2013 the abolition of mortgage duty, transfer duty on unquoted marketable securities, and transfer duty on non-land business assets. The South Australian government has also deferred indefinitely the abolition of stamp duty on the transfer of non-land business assets and unquoted marketable securities. Similarly, the abolition of stamp duty on the transfer of non-land business assets has been deferred indefinitely in the Northern Territory.