Client Update: Beware of Qld, SA and NT stamp duty changes
2 June 2011
In brief: Queensland, South Australia and the Northern Territory are to make important changes to their stamp duties legislation, with effect from 1 July 2011. The changes will broaden the reach of landholder duty and impose greater duty on a larger range of transactions, particularly affecting ones involving real property, mining tenements and listed entities. Partner Adrian Chek (view CV) summarises the changes and considers the importance of the timing of any upcoming transactions.
- How does it affect you?
- Queensland landholder changes
- SA landholder changes
- SA general anti-avoidance provisions
- NT rate increase
The Queensland and SA changes will substantially broaden the reach of transactions that will be subject to the new landholder rules, including the imposition of duty on listed entities.
In the case of the NT, from 1 July 2011, the rate of duty for landholder transactions and direct acquisitions of dutiable property will be increased from 4.95 to 5.45 per cent where the dutiable value is $3 million or greater.
Parties considering acquisitions of entities that directly or indirectly own significant real property, mining tenements or other interests in land located in SA, Queensland or the NT, or considering a direct acquisition of land, mining tenements or businesses in the NT, should consider whether they will be liable and the timing of their transactions, ie, whether they should be entered into by 30 June 2011.
The announced Queensland landholder changes were dealt with in detail in our earlier Focus.
In summary, from 1 July 2011, the acquisition of 50 per cent or more of the shares in an unlisted company that holds land in Queensland (directly or indirectly) with a value of $2 million or more, will trigger duty at transfer duty rates of up to 5.25 per cent by reference to the value of the Queensland landholdings.
The new rules will be expanded to apply to the acquisition of a 90 per cent or greater interest in listed companies and listed unit trusts that hold land in Queensland (directly or indirectly) with a value of $2 million or more (with duty being imposed at 10 per cent of the duty that would be chargeable at transfer duty rates).
At the time of writing, no draft legislation has yet been released, although a Bill is expected some time in the second half of June 2011. The new rules have been announced to apply to the acquisition of an interest on or after 1 July 2011, although it is not clear if the old rules will apply if the acquisition occurs under a contract entered into before 1 July 2011.
In broad terms, the proposed SA changes, which will take effect from 1 July 2011, are similar to those proposed in Queensland. The move from the current 'land rich' provisions to 'landholder' provisions will mean that duty potentially applies to a far greater range of transactions involving entities that directly or indirectly own land in SA with a value of $1 million or more.
In particular, the current 60 per cent 'land rich' test will be abolished, so that the value of the non-land assets of the entity will become irrelevant.
For private companies and private trusts, the threshold for acquisition is a 50 per cent interest. The rate of duty is that applying on the direct transfer of land (rates of up to 5.5 per cent).
In addition, the provisions will apply to listed companies and trusts and widely held trusts, although in those cases the threshold for acquisition will be 90 per cent, and the rate of duty will be 10 per cent of the rates that would apply on the direct transfer of land.
A widely held trust is defined as a unit trust with at least 300 members, none of whom own more than 20 per cent of the units in the trust.
'Land', for the purposes of the provisions, will include not only real property and other interests in land, but also leases and licences under the mining and petroleum legislation.
Where the thresholds for liability are exceeded, duty is calculated not only on the value of SA land, but also on plant and equipment in SA.
Under the proposed transitional rules, the new provisions apply to an acquisition of an interest in a landholding entity on or after 1 July 2011. This will generally be when completion of a transaction takes place. However, the existing provisions will continue to apply if the acquisition takes place as a result of an agreement entered into or option executed before 1 July 2011.
SA also proposes to introduce general anti-avoidance provisions with effect from 1 July 2011. The provisions are very similar to those in New South Wales, which, in turn, are modelled ultimately on Part IVA of the Income Tax Assessment Act 1936 (Cth). In summary, they apply to a scheme of an artificial, blatant or contrived nature, entered into for the sole or dominant purpose of enabling a liability for stamp duty (or other state tax) to be avoided or reduced.
From 1 July 2011, the rate of duty on the conveyance of dutiable property in the NT will increase from 4.95 per cent to 5.45 per cent, where the dutiable value of the transaction is $3 million or greater.
This change will affect both the direct acquisition of dutiable property and any liability for landholder duty. Dutiable property includes land, mining tenements and businesses carried on in the NT. For landholder purposes, the rate change will potentially impact on acquisitions in entities that directly or indirectly hold real property, mining tenements or other interests in land located in the NT.
The changes are expressed in the draft legislation to apply from 1 July 2011. In the case of landholder duty, this would apply where the completion of the transaction takes place on or after 1 July 2011. In the case of a direct acquisition of dutiable property, the Northern Territory Revenue Office has issued a ruling stating that it will apply to contracts signed on or after 1 July 2011, including where the option was granted before 1 July 2011. This implies that the current lower rate will apply where the contract is signed before 1 July 2011, even if completion takes place on or after 1 July 2011.
Parties with proposed transactions involving entities holding land, mining tenements or other interests in land in SA, Queensland or the NT should consider whether there is a potential liability for duty. They should consider as well whether it is appropriate to bring forward the timing of their transactions. Parties intending to acquire directly land, mining tenements or businesses in the NT should also consider the timing of their transactions.
- Adrian ChekPartner,
Ph: +61 2 9230 4800
- Michael PerezPartner,
Ph: +61 3 9613 8500
- Katrina ParkynPartner,
Ph: +61 7 3334 3323
- Tony SheehanConsultant,
Ph: +61 2 9230 4781