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Prior 1 July 2012, if you acquired an interest, such as shares or units, in a company or unit trust scheme that is a land rich landholder, you may be liable for land rich duty.

From 1 July 2012, the landholder provisions apply. 

The following information outlines the operation of the land rich duty provisions in respect of acquisitions of interests in land rich landholders that occurred prior to 1 July 2012. All references to the Duties Act 2000 are to the Act in force prior to 1 July 2012.

A liability to duty arises if a person makes a relevant acquisition in a land rich landholder. A relevant acquisition occurs when a person acquires an interest in a land rich landholder that constitutes the acquisition of a significant interest or a further interest in the landholder.

A relevant acquisition may also occur when a person obtains control of a land rich landholder or a person or persons acquire interests on the conversion of a unit trust scheme from private to public or public to private.

Please refer to ss. 79, 89C and 89E of the Duties Act 2000 (the Act).

Relevant acquisition of a significant interest

A person makes a relevant acquisition of a significant interest in a land rich landholder if the person acquires an interest:

  • That is of itself a significant interest in the landholder, or 
  • That when aggregated with other interests in the landholder acquired by the person or an associated person (or both) on the same day or within three years preceding the acquisition of the interest, results in an aggregation that amounts to a significant interest in the landholder, or 
  • That when aggregated with other interests in the landholder acquired by the person (including an associated person) or any person in an associated transaction (or both) on the same day or within three years preceding the acquisition of the interest, results in an aggregation that amounts to a significant interest in the landholder. 

In relation to a landholder that is a private unit trust scheme, a significant interest is an interest that entitles a person to a distribution of 20 per cent or more of the property on the winding up (vesting) of the landholder.

In the case of a landholder that is a private company or wholesale unit trust scheme, a significant interest is an interest that entitles a person to a distribution of 50 per cent or more of the property on the winding up (or vesting) of the landholder.

Please refer to ss. 3 and 79(1)(a) of the Act and Revenue Ruling DA-039.

Relevant acquisition of a further interest

Once a person has made a relevant acquisition of a significant interest, any additional interest acquired by the person, or an associated person, is a relevant acquisition of a further interest.

Please refer to ss. 3 and 79(1)(b) of the Act.

Relevant acquisition on acquiring control over a land rich landholder

If a person within a three-year period acquires, directly or indirectly, control of a land rich landholder, other than by a relevant acquisition of a significant interest and/or further interests, the person is taken to have made a relevant acquisition of an interest in the landholder of 100 per cent unless the Commissioner determines otherwise.

A person may be considered to have acquired control over a landholder if they acquire the capacity to determine or influence the outcome of decisions about the landholder’s financial and operating policies.

In recognising the relationship between ownership and control and the potential for double duty, the application of the control provisions is limited to cases where control is acquired other than by way of a relevant acquisition under s79(1) of the Act. The intention of the control provisions is to extend the way a relevant acquisition may arise under the Act to include arrangements that provide for the ultimate control of a land rich landholder. As a result, the provisions are capable of bringing to duty the indirect acquisition of a land rich subsidiary company or sub trust through the direct acquisition of the parent entity.

The provisions can also apply to a person who is appointed to the board of directors of a land rich landholder (or the corporate trustee of a land rich landholder). Provided the shareholders or unit holders have not made arrangements that allow the director to benefit, or exercise rights which confer benefits similar to holding an interest in the landholder, the Commissioner will take the view that the director has not acquired control (and made a relevant acquisition of an interest of 100 per cent) as a result of such an appointment.

Other possible applications of the control provisions are:

Example 1
 

Example 1 of the application of the control provisions


In this example, the majority shareholder of a land rich private company grants for valuable consideration an unlimited and irrevocable power of attorney over the rights attaching to its shares in the company to a minority shareholder. There is an understanding that the majority shareholder will remain registered as a shareholder of the land rich company but that the minority shareholder will use the power of attorney over the voting rights attaching to the shares to its advantage. In such circumstances, the minority shareholder will be considered to have acquired control of the landholder and to have made a relevant acquisition of an interest of 99 per cent.

Example 2
 

Example 2 of the application of the control provisions


In this example, X Co acquires all the issued share capital of the six private companies that together own and control a land rich private unit trust scheme. As each company’s interest in the unit trust scheme is less than 20 per cent, none of the companies can be considered land rich under the constructive ownership provisions of the Act.

Consequently, X’s acquisition of all the issued share capital in each company would not give rise to a relevant acquisition. However, by acquiring all the shares in each of the companies that own and control the unit trust scheme, X Co has indirectly gained control over the scheme. As a result, X Co is considered to have made a relevant acquisition of an interest of 100 per cent in the unit trust scheme.

Please refer to ss. 79(5) to (7) of the Act.

Relevant acquisition on conversion of a unit trust scheme

In certain circumstances, the land rich provisions may charge duty on interests acquired as a result of the conversion of a unit trust scheme from private to public, or from public to private.

The provisions dealing with the conversion of a private unit trust scheme to a public unit trust scheme impose duty on arrangements whereby the conversion of the scheme effectively constitutes a sale or other change in the underlying ownership of the land holdings of the scheme. Similarly, the provisions dealing with the conversion of a public unit trust scheme to a private unit trust scheme bring to duty the otherwise duty free acquisition of the land holdings owned by a public unit trust scheme on its takeover or merger.

Please refer to ss. 89C to 89E of the Act.