Land rich duty calculations
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 relevant acquisition is charged with duty at the same rates that apply to land transfers under Chapter 2 of the Duties Act 2000 (the Act).
However, a different method of calculation applies depending on whether the relevant acquisition is the result of the acquisition of a single interest, aggregated interests or a further interest. In certain cases, the Commissioner provides a concession on the calculation of duty on a relevant acquisition in a land rich landholder which owns, or is deemed to own, certain leasehold land or primary production land.
Duty on acquisition of a single interest
When a relevant acquisition results from an acquisition that is of itself a significant interest, duty is charged on the amount calculated by multiplying the unencumbered value of all land holdings of the landholder in Victoria at the date of acquisition by the percentage interest acquired as a result of the relevant acquisition.
For example, the duty payable on a relevant acquisition made when a person acquires a 70 per cent interest in a land rich landholder which has $10 million in Victorian land holdings (please refer to s83(1) of the Act) is calculated as follows:
Unencumbered value of all Victorian land holdings
Percentage interest acquired as a result of relevant acquisition
Dutiable value [A x B]
Relevant rate of duty
|Duty payable [C x D]||$385,000|
Duty on acquisition of aggregated interests
When a relevant acquisition is the result of the aggregation of interests acquired within a three-year period by a person either alone or together with an associated person or pursuant to an associated transaction, duty is charged on the amount calculated in the manner provided above for a single dutiable acquisition severally in respect of each of the interests comprising the relevant acquisition.
For example, the duty payable on a relevant acquisition comprising the aggregation of a 15 per cent interest in a private unit trust scheme in 2004 when the trust’s Victorian land holdings were valued at $2 million with a 15 per cent interest in 2005 when the trust’s land holdings were valued at $4 million is calculated as follows:
Value of 15% interest of trust's Victorian land holdings in 2004
|[$2 million x 15%] $300,000 (A)|
Value of 15% interest of trust's Victorian land holdings in 2005
|[$4 million x 15%] $600,000 (B)|
Dutiable value [A x B]
Relevant rate of duty
|Duty payable [C x D]||$49,500|
Please refer to s83(1B) of the Act.
Duty on acquisition of further interest
When duty has been charged on a prior relevant acquisition, and a further interest is acquired in the landholder, duty on the further interest is calculated by determining the duty that would be chargeable on the prior interests acquired plus the further interest and subtracting from that amount the duty chargeable in respect of the prior interests.
The reference to duty chargeable is not a reference to duty actually paid on the prior interests at the time of their acquisition, but rather a reference to duty chargeable at the time of the acquisition of the further interest.
For example, a person made a relevant acquisition of a 25 per cent interest in a land rich private unit trust scheme in 2004. At that time the Victorian land holdings of the scheme were valued at $10 million. In 2005 that person acquired a further 10 per cent in the scheme. The value of its Victorian land holdings in 2005 had increased to $12 million. The duty payable on the acquisition of the further interest is calculated as follows:
Duty payable on prior and further interest
|[$12M x 35% x 5.5%] $231,000|
Duty payable on prior interest
|[$12M x 25% x 5.5%] $165,000|
|Duty payable||[$231,000 - $165,000] $66,000|
Please refer to s83(2) of the Act.
Phasing-in formula and deduction for marketable securities duty
Where a landholder’s land holdings in Victoria are between $1,000,000 and $1,500,000, duty is calculated in accordance with the formula [(A - $1,000,000)/$500,000] x B, where:
- is the unencumbered value of the land holdings in Victoria of the landholder at the time the relevant acquisition was made, and
- is the duty that, apart from the application of the formula, would be chargeable under the land rich provisions of the Act.
A deduction is also available for any marketable securities duty paid in Victoria or another jurisdiction in Australia on the acquisition of an interest in the landholder.
Please refer to ss. 83(3) and 84 of the Act.
Concessions for certain leasehold estates and primary production land
In determining the duty payable on a relevant acquisition, the Commissioner provides the following concessions in relation to landholders whose land holdings include leasehold estates and/or primary production land. It should be noted that leasehold estates are a land holding for the purposes of the land rich provisions and must be taken into account when determining whether the landholder is land rich.
In cases involving the acquisition of an interest in a land rich landholder whose land holdings comprise:
- Only leasehold estates that are not dutiable property under s10(1)(a) of the Act - no duty will be payable on the acquisition as it will be exempt from duty under s85(1) of the Act,
- Leasehold estates (none of which are dutiable property under s10(1)(a) of the Act) and freehold land - duty will be payable only by reference to the landholder’s Victorian freehold land, and
- Leasehold estates (all of which dutiable property under s10(1)(a) of the Act) and freehold land - duty will be payable by reference to all the landholder’s Victorian land holdings (both leasehold and freehold estates).
In cases involving the relevant acquisition of an interest by a person from a lineal ancestor or descendant in a land rich landholder that owns land used primarily for primary production and other land not used for primary production purposes, the Commissioner provides the following concession in respect of the calculation of duty:
- Duty will only be charged with reference to the land not used for primary production purposes. No duty will be charged in respect of the land used primarily for primary production purposes.