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Landholder duty

Landholder duty

Acquisition of interests in landholders apply to relevant acquisitions in private landholders made on or after 1 July 2009 and in public landholders on or after 1 October 2009. Landholder duty is duty paid on the acquisition, by a person, of a significant interest in a landholder.

A landholder is a unit trust scheme, a private company or a listed company that has land holdings in New South Wales (NSW) with a threshold value of $2,000,000 or more.

A land holder can be either private (private unit trust scheme or private company) or public (public unit trust scheme or listed company).

Threshold values

What is the threshold value?

The threshold value is the total value of all landholdings in NSW of the unit trust scheme, or private or listed company.

Value of land holding is the registered land value of the land as at 1 July in the previous year.

Registered land value (including a parcel) is the land value of the land as entered in the Register of Land values kept by the Valuer-General under Section 14CC of the Valuation of Land Act 1916.

For any land holding, such as leasehold interest, where the value cannot be determined, the value of the land holding is the unencumbered value of the land holding.

For a land holding that consists of aproportionate interest in an estate in fee simple in land (other than strata lots), the value of the land holding is the proportionate interest of the registered land value as at 1 July in the previous year.

For a land holding that consists an estate in fee simple in a strata lot (or consists of a proportionate interest), the value of the land holding is an amount that relates to the registered land value of the relevant parcel (as at 1 July in the previous year) the same proportion as the unit entitlement of the lot bears to the aggregate unit entitlement.

The proportionate interests of joint tenants in an estate in fee simple are to be determined as if they were tenants in common in equal shares.

What are the land holdings of a landholder?

A land holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor.

An interest in land is a land holding of a unit trust scheme only to the extent that the interest is held:

  • by the trustee of the unit trust scheme in their capacity as trustee of the scheme
  • by a custodian of the trustee of the unit trust scheme in their capacity as a custodian
  • by a sub-custodian of the custodian of the trustee of the unit trust scheme in their capacity as sub-custodian.

An interest in land is not a land holding of a company if the company holds land on trust, but only if the company is not a beneficiary of the trust.

Acquisitions in a landholder

What is a relevant acquisition?

You make a relevant acquisition if you:

  • acquire an interest in a landholder:
    • that is a significant interest
    • that when aggregated with other interests you or an associated person holds in the landholder leads to a significiant interest in the landholder
    • that when aggregated with other interests you or another person acquire under transactions that evidence give effect to arise from what is substantially one arrangement between both parties, results in a significant interest in the landholder.
  • have a significant interest in the landholder and acquire a further interest in the landholder.

Interests are to be treated as if they were acquired or held independently by separate persons:

  • if a person who acquires or holds an interest in a landholder is a trustee for two or more trusts and acquires an interest for the different trusts
  • if a person who acquires or holds an interest in a landholder is a life company and acquires or holds the interest for different statutory funds
  • if a life company acquires or holds an interest in a landholder other than for a statutory fund.

Note: If you acquire an interest in a private landholder that results in the private landholder ceasing to be a private landholder, the acquisition is not a relevant acquisition.

Interests in a landholder

What is an interest?

You have an interest in a landholder if in the event of a distribution of all property in the landholder you would be entitled to any ofthe property distributed.

A debt interest in a landholder is not an an interest in a landholder.

What is a significant interest in a landholder?

You have a significant interest in a landholder if you are entitled to the following in case there is a distribution of all property in the landholder:

  • Private landholder – 50% or more of the property distributed
  • Public landholder – 90% or more of the property distributed.

How is an interest acquired?

You may acquire an interest in a landholder in the following ways:

  • the purchase, gift or issue of a unit or share
  • the cancellation, redemption or surrender of a unit or share
  • the removal, cancellation or alteration of a right for a unit or share
  • the payment of an amount owing for a unit or share
  • If you hold an interest in the landholder and the capacity in which the person holds the interest changes.

What is a linked entity?

In addition to any interest in land or other property a company or unit trust holds in its own right, it is taken to hold an interest in land or other property held by a linked entity.

A linked entity of a private unit trust or a private company (the principal entity) means a person:

  • who is part of a chain of people:
    • which includes the principal entity
    • which comprised of one or more links
    • in which a link exists if a person would be entitled to receive not less than 50% of the unencumbered value of the property of another person in the event of a distribution of all property of the person
    • which does not include, in any of the links between the person and the principal entity, a public unit trust or a listed company.
  • who is not a public unit trust scheme or a listed company.

A linked entity of a public unit trust scheme or list company, means a person who is part of a chain or people:

  • which includes the principal entity
  • which is comprised of one or more links
  • in which a link exists if a person would be entitled to receive not less than 50% of the unencumbered value of the property of another person in the event of a distribution of all the property of the person.

The value, for duty purposes, of the interest in land or other property that a unit trust scheme, private company or listed company (being a principal entity) is taken to hold because of a holding by a linked entity, is that portion of the interest’s unencumbered value to which the unit trust scheme or company would be entitled (without regard to any liabilities of the linked entity or any other person in the ownership chain) in the event of a distribution of all the property of each entitiy in the chain of entities.

A linked entity also include Discretionary Trusts.

A person or a member of a class of persons in whose favour, by the terms of a discretionary trust, capital the subject of the trust may be applied:

  • in the event of the exercise of a power or discretion in favour of the person or class, or
  • in the event that a discretion conferred under the trust is not exercised,

is, for the purposes of this section, a beneficiary of the trust.

A beneficiary of a discretionary trust is taken to own or to be otherwise entitled to the property the subject of the trust.

Also any property that is the subject of a discretionary trust is taken to be the subject of any other discretionary trust:

  • that is, or
  • any trustee of which (in the capacity of trustee) is, a beneficiary of it.

Note: Person includes a landholder.

Discretionary trust is defined in the Dictionary of the Duties Act 1997.

Paying the duty

When must duty be paid?

The duty must be paid within three months after the liability arises.

Landholder duty is a self assessment duty and a person who lodged an acquisition statement is required to calculate and pay the duty.

Who must lodge an acquisition statement?

A person who has made a relevant acquisition must prepare an acquisition statement and lodge it with the Chief Commissioner.

When does liability for duty arise?

A liability arises when a relevant acquisition is made in a landholder.

Who is liable to pay the duty?

Duty is paid by the person who makes the relevant acquisition.

If the acquisition is the result of the combining the interests of associated persons, those involved in the acquisition are jointly and severally liable for the payment of duty.

Applying duty to relevant acquisitions

How is duty charged on relevant acquistions?

Public landholder

If a relevant acquisition is in a public landholder, the duty charged is 10%, at the general rate, of the duty that would be charged on a transfer of all the land holdings and goods of the landholder in NSW.

If the acquisition statement also includes an exempt acquisition, the duty charged is calculated after deducting the proportion of the value of the interest acquired in the exempt acquisition from the duitable value of the land holdings.

If the public landholder is a widely held trust, the duty payable is reduced by the following amounts (if applicable):

  • the amount of duty paid or payable in respect of a dutiable transaction in relation to the units concerned
  • any duty of a similar nature paid or payable in another Australian jurisdiction.

If duty is charged on a relevant acquisition by a person in a public landholder, further acquisitions made by that person in that public landholder will not attract duty.

Private landholder

If an acquisition statement states only one relevant acquisition in a private landholder for the statement period, duty is charged at the general rate on the the amount calculated by multiplying the unencumbered value of all land holding of the landholder in NSW by the the proportion of the value represented by the interest acquired.

If an acquisition statement states more than one relevant acquisition in a public landholder for the statement period, duty is charged at the general rate on the amount calculated by multiplying the unencumbered value of all land holdings of landholder in NSW by the proportion of the value represented by the combined interest acquired.

Duty payable is to be reduced by the sum of the duty paid or payable for an acquisition by a person or associated person of an interest in the same landholder, by the proportion attributed to the amount of the duty payable.

Duty is to be reduced by the sum of the amounts calculated individually in respect of each acquisition of an interest in a landholder by a person or associated person, in accordance with the following formula:

A/B x C

A is the unencumbered value of the land holdings in NSW of the landholder at the time of acquisition.

B is the unencumbered value of all property of the landholder at the time of acquisition.

C is the sum of:

  • the duty paid or payable in respect of:
    • a duitable transaction in relation to the units or shares acquired
    • a capital reduction or a rights alertation by which an interest in the landholder was acquired
    • an allotment of shares by which an interest in the landholder was acquired.
  • Any duty of a similar nature paid or payable in another Australian jurisdiction.

Example

ABC Pty Ltd is a private company whose total assests are valued at $6,000,000. This includes NSW land tax value of $2,000,000.

The unencumbered value of the land is $2,800,000. It also has dutiable goods in NSW valued at $200,000.

X acquires 60% of the shares in ABC Pty Ltd.

  1. Duty is payable on the transfer of shares

    Dutiable value = $3,500,000.

    Duty payable = $21,000 [Share duty is charged at the rate of 60 cents per $100 (or part), of the dutiable value of the shares].

  2. Calculation of landholder duty

    Unencumbered value of land = $2,800,000
    Other dutiable goods = $200,000

    60% of $3,000,000 = $1,800,000 is the dutiable value.

    Landholder duty payable on $1,800,000 = $84,490.

  3. Credit for the duty paid on the share transfer

    Using the formula A/B x C outlined before the example.

    A = $3,000,000
    B = $6,000,000
    C = $21,000

    Therefore the amount of credit is $3,000,000/$6,000,000 x $21,000 = $10,500

    Landholder duty payable = $73,990 ($84,490 – $10,500)

If an relevant acquisition is made by aggregating the interests of an associated person, the Chief Commissioner may assess and charge duty on the interest separately if they are satisfied that the associated person acquired their interest(s) independently.

Duty is not charged on an exempt acquisition of an interest in a landholder.

Bare Trustees

The ultimate beneficial owner of an interest acquired by the legal owner is liable to pay any duty charged on a relevant acquisition made as a result of the acquisition by the legal owner. (Refer to Revenue ruling DUT 041.)

For example

A acquires an interest in a land holder as a bare trustee for B. A is the legal owner and B is the beneficial owner. B holds that interest as a bare trustee for C. As a result, C is also a beneficial owner of the interest in the land holder acquired by A. If C does not hold an interest as a bare trustee for anyone else, C is the ultimate benefical owner of the interest and is liable for the duty.

For the purposes of determining whether an acquisition is a relevant acquisition, the interests held by the ultimate beneficial owner or associated person will be combined.

For more information, view Revenue ruling DUT 041.

What is not included as goods of a landholder?

Goods of a land holder does not include:

  • goods that are stock-in-trade,
  • materials held for use in manufacture,
  • goods under manufacture
  • goods held or used in connection with land used for primary production
  • livestock
  • a registered motor vehicle
  • a ship or vessel.

Goods are goods of a landholder if the landholder has any interest in the goods, other than an interest as mortgagee, chargee or other secured creditor.

Goods are goods of a unit trust scheme only to the extent that the interest in the goods is held by the trustee of the unit trust scheme in its capacity as trustee of the scheme or by a custodian of the trustee of the unit trust scheme in its capacity as custodian.

Goods are not goods of a company if the interest the company has in the goods is held on trust and the company is not a beneficiary of the trust.

Last updated: 6 January 2014