You are here

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.

What is a land holding?

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.

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 (s72) includes buildings and other structures permanently affixed to land, land covered with water and any estate, interest, easement, servitude, privilege or right in or over land.

Property other than land

Property is not defined in the Act. Accordingly, when calculating the land to property ratio of a landholder, all property at general law is counted other than property expressly excluded under ss.71(3) and (4) of the Act.

Generally, for an item to qualify as property at law, it must be identifiable, capable of ownership and be able to be transferred. Usually, most items listed as assets in a landholder’s financial statements qualify as property at law.

However, certain items are merely accounting entries that cannot be regarded as property at law and therefore cannot be taken into account in determining whether a landholder is land rich (such as capitalised expenses and future income tax benefits). On the other hand, certain off-balance sheet items such as goodwill, intellectual property and contractual rights may be included.

Please refer to s71(3) and (4) of the Act.

Entitlements to land or other property

A landholder can own or be entitled to land or other property by owning it directly or having someone hold it on its behalf. A landholder can also be deemed to own or to be otherwise entitled to land or other property through a linked entity, a discretionary trust or under an uncompleted agreement.

Direct ownership or entitlement to land or other property

A landholder can own land or other property by owning it itself. If a landholder is a private company, its interest in the land or other property must be a beneficial interest.

If the landholder is a private unit trust scheme or a wholesale unit trust scheme, the trustee of the scheme must hold the interest in the land or other property in its capacity as trustee of the scheme. Such ownership will extend to include land or other property held on behalf of a landholder by a bare trustee, nominee or custodian.

Please refer to s72(2) of the Act.

Linked entities and indirect (constructive) ownership/entitlement

In addition to land or other property that a landholder may hold in its own right, a landholder can be taken to hold land or other property if it is entitled to it through a linked entity or a chain or web of linked entities.

The value for duty purposes of the land or other property that a landholder holds through a linked entity or a chain or web of linked entities is the portion of the unencumbered value of the land or other property to which the landholder would be entitled on a notional winding up of all the linked entities and without any regard to the liabilities of any of the linked entities.

However, a landholder is not taken to be entitled to the land or other property of linked entities unless at least 20 per cent of it is received by the landholder on a notional winding up of all the relevant linked entities.

Please refer to s74 of the Act.

Discretionary trusts and indirect (constructive) ownership/entitlement

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 and other property of the discretionary trust, unless the Commissioner determines otherwise.

Please refer to s75 of the Act and Revenue Ruling DA-033.

Deemed ownership or disposal 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.

In respect of property other than land, a landholder or linked entity that is a party to an uncompleted agreement for the acquisition or disposal of such property is deemed to not be entitled to the property.

A refund of duty may be available on the completion or rescission of an agreement referred to above.

Please refer to ss.73 and 88 of the Act.