Land-rich duty and landholder duty

Analysis

Land-rich duty and landholder duty

Stamp duties levied by the Australian states and territories

Land-rich duty and landholder duty are stamp duties levied by the Australian states and territories. Each state and territory charges one or the other. Both forms of duty are payable on transfers of shares or units in companies or unit trusts that hold land (directly or indirectly) in Australia. It does not matter whether the shares or units transferred are in an Australian entity or an overseas entity.

Land-rich duty

Land-rich duty was introduced in the 1980s to deal with avoidance of duty by transferring interests in land-rich entities – unlisted companies and unit trusts – instead of transferring the land itself.

Before land-rich duty, a purchase of shares was subject to duty at around 60 cents for each $100 of share value, and duty on the purchase of the land was payable at rates of up to 5.5% of the land value. This meant that a person who wanted to acquire a building or a block of land could buy the company that owned the land and pay significantly less duty.

Land rich duty took care of that by imposing the same duty on a transfer of a company as on the transfer of the underlying land.

Since 1 July 2012, when Victoria adopted a landholder duty model, Tasmania has been the only jurisdiction that still applies land-rich duty. Only 'land-rich' entities are affected by land-rich duty. An entity is land rich if it owns land worth over a threshold amount ($500,000 in Tasmania) and has a minimum percentage of the value of its assets in land (currently 60%).

Landholder duty

Landholder duty is a recent innovation and has replaced land-rich duty in New South Wales, Western Australia, Queensland, and South Australia. On 1 July 2012 Victoria replaced its land-rich duty provisions with a landholder duty model. The Victorian model contains several unique features.

The Northern Territory and the Australian Capital Territory also use a form of landholder duty. Landholder duty broadens the base by doing away with the land-rich percentage threshold and replacing it with a simple minimum land-value threshold. Landholder duty states and territories tend to impose duty on both land and goods in their jurisdiction and also generally impose duty on takeovers of listed entities. Queensland and South Australia also have a trust look through for trusts, taxing dealings in the trust as dealings in the underlying dutiable trust assets.

Before the introduction of landholder duty, it was possible that land-rich duty would not apply to the transfer of a business that owned land. With landholder duty, any land holding is now probably enough to trigger a duty liability when buying the entity that owns the land.

It is important to remember that duty applies where the land is. A takeover of a company with land holdings can be subject to duty in multiple states and territories - with different thresholds and duty rates applying in each.

Deloitte's national State Taxes team has broad experience in the application of the land-rich and landholder duty provisions in all Australian states and territories.

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