26/02/2018. Stamp duty issues, themes & trends

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1 Stamp duty issues, themes & trends 1

2 Overview What does stamp duty still apply to? Foreign & Absentee surcharges Stamp duty & Land tax Vacant property tax What does stamp duty still apply to? Direct dealings in real property Land & buildings Leases & leasehold improvements Fixed improvements Moveable plant & equipment Stock in trade? Trade debtors? Assumption of liabilities is consideration 2

3 What does stamp duty still apply to? Intangible assets Goodwill Intellectual Property Contracts No marketable security duty but consider landholder duty Landholder duty Indirect land transfer duty Old land rich Private companies & unit trusts Listed companies & trusts Land value thresholds ACT any value Tas & NT - $500,000 Vic & SA - $1 million NSW, Qld & WA - $2 million 3

4 Landholder duty Victoria & Tasmania Relevant Acquisition Private companies & unlisted trusts Vic - 20% / Tas - 50% Vic wholesale unit trusts 50% Listed companies / trusts Vic & Tas - 90% Aggregation associated persons / associated transaction Landholder duty Anything fixed to land Broader concept than fixtures Increases the value to be taken into account when considering whether the threshold value of $1 million (Vic) / $500,000 (Tas) has been reached Tracing indirectly held land Interest A person has an interest in a landholder if, in the event of a distribution of all the property of the landholder, the person would be entitled (otherwise than as a creditor or other person to whom the landholder is liable) to receive any of the property distributed 4

5 Landholder duty Share/unit transfers, redemptions, issues etc Conversion from private to public Vic Rate of duty: Private company/trusts 5.5% (plus surcharge if applicable) Public companies 0.55% (plus surcharge if applicable) Goods (non-fixed plant & equipment) Control / Economic Entitlement (Vic) Victorian Dutiable Leases Background Lease duty was abolished in Victoria in April 2001 The dutiable lease provisions came into effect in November 2008 Original intent to be anti avoidance in nature Introduced to capture leasing arrangements where rights in the underlying land/and or the substantively the economic benefits of the land akin to ownership were being transferred 5

6 Victorian Dutiable Leases Grant, Transfer, Assignment or Surrender of a Lease Consideration for the lease (ie premiums) right or option to purchase right of first refusal any other arrangement where an interest is acquired in the land other than the leasehold Same duty as a direct transfer of land Amount of duty calculated is by reference to the higher of: Any consideration paid (other than rent reserved), including the value of non-monetary consideration; and The market value of the underlying land the subject of the lease Victorian Dutiable Leases Trend emerging to apply the provisions as a stand alone collection mechanised and not as anti-avoidance Strict findings to identify consideration Increased scrutiny of leases and arrangements Application of provisions to capture leases that have been transferred for no consideration Wider application than intended by Parliament Caution to be undertaken when advising 6

7 Vic 7% (highest aggregate duty rate 12.5%) NSW 8% (highest aggregate duty rate 15%) Qld 3% (highest aggregate duty rate 8.75%) SA 7% (highest aggregate duty rate 12.5%) WA has also announced a 4% surcharge from 1 January 2019 (giving it a highest aggregate duty rate of 9.15%) Key concepts to be covered Who is a foreign purchaser and what differences arise in each State? What is residential property? Changes in intention in Victoria Discretionary relief 7

8 Who is a foreign purchaser? NSW relies on FIRB definition with minimal changes Queensland, Victoria and South Australia have introduced their own definitions but similar requirements to FIRB with a higher percentage ownership threshold: 50% or more for Queensland and South Australia; More than 50% for Victoria Individuals Not Australian citizen, permanent resident or NZ resident Corporations / Trusts Foreign Incorporated companies, regardless of ownership / control For Australian corporations and trusts, a foreign person must hold a substantial interest based on ownership, voting power or potential voting power: 50% or more for Qld and SA More than 50% for Vic 20% or more for NSW Necessary to trace through a chain or series of interests 8

9 Aggregation of interests for 20% and 50% threshold NSW / Qld / SA* all foreigners (even if not associates) and associates (even if the associate is not foreign) Victoria only associated persons Discretionary trusts NSW foreign income or capital beneficiary (max discretionary entitlement) 20% Victoria foreign capital beneficiary (max discretionary entitlement) more than 50% Qld foreign taker in default 50% SA one or more of the following is a foreign person: a trustee; a person who has the power to appoint under the trust; an identified object under the trust; a person who takes capital of the trust property in default 9

10 Discretionary trusts NSW / Vic very broad definition For a discretionary trust, each beneficiary to whom the trustee has discretion to distribute the income or property is deemed to have the maximum percentage interest in the income or property that the trustee may exercise a discretion to distribute to them. Discretionary trust deeds often give the trustee wide powers to distribute income and/or property. Potential foreign beneficiary can taint the discretionary trust even if no actual or likely distribution Discretionary trusts Amendments to remove foreign beneficiaries Resettlement? Re declaration? NSW Revenue Ruling No. DUT 017 Variations to Trusts NSW Revenue Ruling No. G Surcharge Land Tax and Duty - Discretionary Trusts Cmr discretion to give retrospective effect to amendments to remove trustee s power to make distributions to any person who is a foreign person 10

11 A B C D A, B, C & D are unrelated Vic no surcharge NSW, Qld & SA surcharge applicable 15% 25% 10% 50% Other Points to Note 3 year reassessment rule in Qld and SA surcharge can apply if a person becomes a foreign person after the transaction 12 month refund rule in SA if a foreign person becomes domestic within 12 months transaction and interest remains the same Potential refund in NSW if foreign surcharge is paid on the agreement and between agreement and transfer, the persons are no longer foreign on transfer NSW looks through apparent purchasers Vic also has broad provisions which can trace through to a foreign person based on rights to control or influence the corporation even if no interest is held 11

12 What is residential property? Land used for a residential purpose Intention is important in Victoria and Queensland is or will be or intends NSW uses concept of dwelling Victoria also captures subsequent changes of intention with no apparent time limit What is residential property? Vacant or substantially vacant land in New South Wales and SA requires consideration of zoning Differing approaches to commercial residential premises specific exemption guidelines/general interpretation 12

13 Potential Areas for uncertainty Student Accommodation Serviced Apartments Retirement villages NSW Revenue Ruling No. G Surcharge Land Tax and Duty - Residential Premises that are not Dwellings Mixed Use Properties NSW apportionment possible Victoria, Qld & SA no apportionment sole or primary use taints all Discretionary relief Special discretionary relief generally requires an ability to demonstrate an active business in Australia / contribution to the State (and for duty surcharge contribution to the housing supply) Vic exemption in legislation and detailed guidelines by gazette Qld ex gratia relief guidance in public ruling NSW has taken a different approach with guidelines to be released soon: - Foreign developer rebate scheme retrospective to 21 June

14 Victorian discretionary relief Operates to, exempt the foreign person who has a controlling interest in a (foreign) corporation, or a substantial interest in the trust estate of a (foreign) trust As such, individuals directly acquiring property will not be eligible Unlikely for any objection rights to a decision to deny an exemption Objection rights in relation to the assessment issued Exemptions granted from foreign purchaser additional duty Period Number of Exemptions Value of exemptions (AUD) 1 July 2015 to 30 November December 2015 to 31 May $4,333,425 1 June 2016 to 31 December $12,331,706 1 January 2017 to 30 June $32,769,692 Foreign purchaser additional duty revenue collected by the SRO Year Number of Transactions Value of exemptions (AUD) 2015 to $ to $

15 Land Tax Absentee Owner Surcharge Land tax surcharge only applies in Vic, NSW and QLD (not SA and WA) What land is caught? Vic Residential & Commercial land 1.5% surcharge (max rate 3.75%) NSW Residential only 2% surcharge (max rate 4%) Qld Absentee individuals holdings of Residential and Commercial land 1.5% surcharge (max rate 3%) Land Tax Absentee Owner Surcharge Absentee owner v foreign purchaser Same definition used in New South Wales Broader definition for land tax in Victoria particularly for trusts Different concept for Qld 15

16 Land Tax Absentee Owner Surcharge Victoria Absentee trusts Discretionary trust at least one specified beneficiary who is an absentee person Unit trust at least one unitholder who is an absentee person Fixed trust at least one beneficiary who is an absentee person and has a beneficial interest in land held subject to the trust Land Tax Absentee Owner Surcharge Exemptions Vic discretionary relief for companies from 2018 LTX year also available for trusts NSW same as stamp duty surcharge guidelines are expected to be released soon Qld no special relief from surcharge 16

17 Land Tax Absentee Owner Surcharge A B C D A, B, C & D are unrelated Property is commercial Vic surcharge applicable c.f. no duty surcharge NSW no surcharge Qld no surcharge SA n/a 15% 25% 10% 50% Land Tax Absentee Owner Surcharge Amount of absentee owner surcharge revenue collected by the SRO Year Number of Transactions Revenue ($million) 2015 to $ to $72.86 Exemptions granted from absentee owner surcharge Period Number of Exemptions Value of exemptions (AUD) 29 June 2015 to 30 November December 2015 to 31 May $11,934, June 2016 to 30 June $75,202,

18 Victorian Vacant Residential Land Tax As part of the Victorian State Budget, the Victorian Government introduced an annual 1% VRLT Applies from 1 January 2018 to homes unoccupied for more than 6 months in the preceding calendar year Like land tax looks at previous 12 months Capital improved value of land vs unimproved value of land Obligation on taxpayer to notify the Commissioner by 15 January Applies to all taxpayers not just absentee/foreigners Victorian Vacant Residential Land Tax What does vacant mean? Exemptions - Holiday homes - City apartments/homes/units used for work purposes - Property transfers during the preceding year - New residential properties 18

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