A land holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor, or a profit a prendre. From 19 June 2019, a land holding also includes an interest in:
- Fixtures that are held separately from the underlying land on which the fixtures are located.
- Land taken to be beneficially owned due to an economic entitlement held in relation to the relevant land.
What is land?
Land is not defined in the Duties Act 2000 (the Act). Based on the Interpretation of Legislation Act 1984 (Vic), land for the purposes of the Act includes land covered with water and any estate, interest, easement, servitude, privilege or right in or over land, such as a lease.
For the purposes of Part 2 of Chapter 3 of the Act, land is deemed to include anything which is fixed to land, irrespective of whether the item:
- Constitutes a fixture at law.
- Is owned separately from the land (such as tenant’s fixtures).
- Is notionally severed or considered to be legally separate to the land as a result of the operation of another Act or law.
An item can be fixed to land by virtue of a physical connection with the land. Ordinarily, this will require something more than the item merely resting on the land by its own weight.
In some circumstances, however, an item resting by its own weight will be regarded as a fixture under common law. Consequently, such an item will be regarded as forming part of the land for the purposes of the landholder provisions.
Exclusion for certain items
To ensure that certain items are not taxed as forming part of the land holdings to which they are attached, there is a specific exclusion for goods that are excluded from the definition of dutiable property, namely goods that are stock-in-trade, materials held for use in manufacture, goods under manufacture and goods held or used in connection with primary production
The Commissioner also has discretion to determine that land does not include an item fixed to the land in circumstances where the thing is:
- owned by a person who is not the person who owns the land or an associated person of the person who owns the land, and
- not used in connection with the land.
The Commissioner's discretion only applies in excluding items as forming part of the land to which they are attached and not whether the items themselves separately constitute land holdings for the purposes of Chapter 3 of the Act.
The following examples illustrate the Commissioner’s discretion in determining when land does not include an item fixed to the land (ss. 72 and 73 of the Act):
- Company A owns and operates a farm on which Company B has constructed four wind turbines. The wind turbines are owned separately by Company B. Company A and Company B are not associated persons. Although the wind turbines would be regarded as forming part of the land, the Commissioner would exercise his discretion to exclude the wind turbines from Company A's land holdings because they are owned separately by Company B and are not used by Company A in connection with its business on the land. The wind turbines however would constitute land holdings for Company B.
- Company A owns and operates a grain storage facility on land to which it has affixed a silo. The silo is subject to a sale and leaseback arrangement with Company B. Accordingly, the silo is owned separately from the land owned by Company A. In this case, the silo would be regarded as being part of the land owned by Company A because it is fixed to the land notwithstanding that it is owned separately from the land. The Commissioner would not exercise his discretion to exclude the silo because the silo is used in connection with the operation of Company A’s grain storage business on the land. Notwithstanding, the silo would also constitute a land holding for Company B.
How can a landholder own or be entitled to land holdings?
A landholder can own or be entitled to land holdings by owning them directly or having someone hold them on its behalf. A landholder can also be deemed to own or to be otherwise entitled to land through a linked entity, a discretionary trust or under an uncompleted agreement.
Direct ownership or entitlement to land holdings
If the landholder is a private unit trust scheme, a wholesale unit trust scheme or a public unit trust scheme, the trustee of the scheme must hold the interest in the land in its capacity as trustee of the scheme.
Such ownership will extend to include land held on behalf of a landholder by a bare trustee, nominee or custodian.
Indirect (constructive) ownership or entitlement to land holdings through linked entities
In addition to land (if any) that a company or unit trust scheme (including a landholder) may hold in its own right, a company or unit trust scheme can be taken to hold land if it is entitled to it through a linked entity or a chain or web of linked entities.
A company or unit trust scheme will not, however, be taken to be entitled to the land of linked entities unless it has an entitlement to at least 20 per cent of the land on a winding up of all relevant linked entities.
A company or unit trust scheme is taken to be entitled to land through a linked entity or linked entities if, on the winding up of all linked entities and without regard to any liabilities of the linked entities, the company or unit trust scheme would receive a distribution of any of the property held by any of the linked entities.
The interest in land the company or unit trust scheme is taken to be entitled to in such circumstances is determined by reference to the proportion of the property of the relevant linked entity or linked entities the company or unit trust scheme would be entitled to receive upon a winding up of all the linked entities.
Where a company or unit trust scheme is taken to be entitled to at least 20 per cent of the land through a linked entity or a chain or web of linked entities, the value of the interest in land that the company or unit trust scheme is considered to hold through such entities is that portion of the unencumbered value of the land which is equivalent to the portion of the unencumbered value of the property to which the company or unit trust scheme would be entitled (without regard to any liabilities of the linked entities) on a winding up of all the linked entities.
Please refer to s75 of the Act and more information about constructive ownership of land holdings through linked entities (Revenue Ruling DA-058).
Indirect (constructive) ownership or entitlement to land holdings through discretionary trusts
A company or unit trust scheme (including a landholder) or linked entity that is a beneficiary of a discretionary trust is taken to own or to be otherwise entitled to 100 per cent of the land of the discretionary trust, even though at law it may not have a present entitlement to any part of such property.
However, to avoid unjust results arising, the Commissioner has discretion to determine that a company or unit trust scheme’s entitlement to the land of a discretionary trust is less than 100 per cent.
Please refer to s76 of the Act and more information about constructive ownership of land holdings of discretionary trusts (Revenue Ruling DA.059).
Deemed ownership or disposal of land or other property under uncompleted agreements
If a landholder or linked entity is a vendor or purchaser under an uncompleted agreement for the sale of land, the landholder or linked entity is taken to be entitled to the whole of the land.
An uncompleted agreement includes an arrangement involving both a put and call option over land.
A refund of duty may be available on the completion or rescission of an agreement referred to above.
Please refer to ss. 74 and 89I of the Act.