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Australia – Stamp Duty Developments.

31 August, 2012

 

 

 This article outlines Australian stamp duty developments in July 2012 which may impact your business, including: Transfer duty

 

  • South Australia: Statutes Amendment and Repeal (Budget 2012) Bill 2012 – this Bill has completed its passage through Parliament and awaits assent.
  • Tasmania: Revenue Measures Bill 2012 – this Bill has received assent as Act No 26 of 2012.
  • Tasmania: Roman Catholic Church Trust Corporation of the Archdiocese of Hobart v Commissioner of State Revenue – the Supreme Court of Tasmania has found that a transfer of plant and equipment was not a gift and was therefore dutiable. Land-rich / Landholder duty
  • Victoria: Commissioner of State Revenue (Vic) v Australand Investments Ltd [2012] VSCA 152 – the Victorian Court of Appeal has dismissed the taxpayer’s and Commissioner’s appeal. Administration  New South Wales: Joint media release – the NSW government has proposed a number of tax-related concessions relating to the road transport industry.

 

Relevant area At a glance
Transfer duty

South Australia: Statutes Amendment and Repeal (Budget 2012) Bill 2012

The Statutes Amendment and Repeal (Budget 2012) Bill 2012 (“Bill”) has completed its passage through South Australian Parliament and awaits assent. The Bill proposes amendments to the Stamp Duties Act 1923 (SA) to establish a scheme to provide for concessions for eligible contracts for purchases of off-the-plan city apartments.

 

Tasmania: Revenue Measures Bill 2012

The Revenue Measures Bill 2012 (“Bill”) has received assent as Act No 26 of 2012. The Act implements the objectives of the 2012 Tasmanian Budget by: (a) revising conveyance duty rates and thresholds (top rate increased from 4% to 4.5%); and (b) increasing the rate of duty charged on contracts of general insurance from 8% of the premium paid to 10% of the premium paid. The amendments take effect from 1 October 2012.

 

Tasmania: Roman Catholic Church Trust Corporation of the Archdiocese of Hobart v Commissioner of State Revenue [2012] TASSC 43 The Supreme Court of Tasmania has found in Roman Catholic Church Trust Corporation of the Archdiocese of Hobart v Commissioner of State Revenue that a transfer of plant and equipment was not a gift and was therefore a dutiable transaction.

 

Facts

 

The Sacred Heart College Incorporated (“SHC”) transferred plant and equipment valued at more than $3.3 million to the appellant by deed in 2010. The deed stated that the transfer was a gift. Duty was not chargeable under the Duties Act 2000 (Tas) on a transfer by way of gift of dutiable property so far as it passes or creates any interest, legal or equitable in furtherance of any charitable purpose or any religious or education purpose that is not charitable also. The deed also provided for the forgiveness by the appellant of loans of around $3.8 million owed by SHC and the assumption by the appellant of certain employee entitlements.

 

Decision

 

The Court found for the Commissioner and upheld the original stamp duty assessment. Blow J agreed that the transfer was not a gift because of the release of the loans and because the appellant had relieved SHC of various obligations in relation to employees. His Honour did not believe that the release of the loan debts and the indemnities were independent of the transfer arrangement.

 

South Australia: Pharmos Nominees Pty Ltd v Commissioner of State Taxation [2012] SASCFC 89

 

The trustee of a discretionary trust, RJ Developments Pty Ltd, owned a commercial property. In 2005, the owners and controllers of the trustee negotiated with the taxpayer for the taxpayer to assume the effective ownership and control of the trust (and thereby the commercial property) in return for payment of $6.975 million. In 2006, settlement of the transactions to effect the change of ownership and control of the trust took place. The settlement involved the grant by the trustee to the taxpayer of an “equity bond” which gave to the taxpayer rights to distributions of income and capital by the trust subject to defined limits in return for payment of $2.969 million. The Commissioner assessed the “equity bond” to stamp duty as a conveyance based on a value of $6.975 million. The taxpayer objected to the assessment contending that regarding the “equity bond” no duty was payable on the instrument and alternatively it was excessive. The objection was disallowed and the taxpayer’s appeal to a single judge was dismissed. The taxpayer appealed to the Full Court. The Full Court held that: 1. The trial judge correctly held that the instrument created proprietary rights in Pharmos. 2. The trial judge correctly held that the instrument was a conveyance within the meaning of s 60. 3. However, the instrument did not vest all of the income or capital or the entire beneficial interest in the assets of the trust and accordingly the Commissioner’s assessment of the value of the property is required to be reconsidered. 4. The trial judge was correct in upholding the Commissioner’s decision on penalty.

Land-rich / Landholder duty

Victoria: Commissioner of State Revenue (Vic) v Australand Investments Ltd [2012] VSCA 152 The Victorian Court of Appeal has dismissed the taxpayer’s and the Commissioner’s appeals in Commissioner of State Revenue (Vic) v Australand Investments Ltd.

 

Facts

 

The taxpayer was the trustee of two property trusts, AWPT4 and AWPT5. The units in both trusts were held by wholesale investors. When the Australand group first issued units to investors it intended that either the various trust portfolios would eventually be merged into a listed property trust or the trusts would be stapled to shares in Australand Holdings Limited (listed on the Australian and Singapore stock exchanges), to form an ASX stapled entity. Units in AWPT4 were offered to investors under an Information Memorandum issued in June 2003. The Information Memorandum for AWPT4 described the “preferred exit strategy” as “acquisition of the Trust by the Australand Group to form part of a stapled entity listed on ASX” and the “alternate exit strategy” as “listing of the Trust, or Sale of the Properties by December 2008.” Units in AWPT5 were offered to investors by an Information Memorandum issued in December 2003, which was on similar terms to the AWPT4 memorandum in relation to exit strategies.

 

On 13 May 2004, relevant amendments to the land rich provisions of Chapter 3 of the Duties Act 2000 (Vic) commenced operation.

 

In September 2005, schemes of arrangement were implemented whereby the units in both AWPT4 and AWPT5 were issued to security holders in Australand Holdings Limited and Australand Property Trust and stapled to these securities. The proceeds from these subscriptions were used to fund the redemption of the units in AWPT4 and AWPT5 held by the wholesale investors.

 

The Commissioner assessed land rich duty on these transactions.

 

The Commissioner appealed against the decision of the Supreme Court’s decision regarding the application of the transitional provisions to the acquisition of units in AWPT4 and the finding that AWPT4 was a “widely held trust”. The taxpayer submitted that the IM accompanying the unit trust offering was a “prospectus” within the ordinary meaning of that word, and also appealed against the Supreme Court’s decision that the transitional provisions did not apply to the acquisition of units in AWPT5.

 

After the completion of the stapling transaction, cross-holdings of related parties remained which could not be quoted on the ASX. In that case, the Act provided that a public trust scheme was taken to have become a private trust scheme immediately before the stapling transaction acquisition. However, a transitional provision (Item 20(7)(b) of schedule 2 of the Act) (applied if the acquisition was made in response to an offer or invitation made or arrangement entered into before 13 May 2004.

 

Decision

 

The Court of Appeal dismissed the taxpayer’s and Commissioner’s appeals. The Court held that the acquisition of units in AWPT4 was made in response to an arrangement entered into before 13 May 2004 and Item 20(7) therefore applied to exempt the taxpayer from duty. In relation to AWPT5, the Court of Appeal found that in the absence of a written agreement resulting in the stapling transaction (which may otherwise have been the subject of another transitional provision), it agreed with the Supreme Court that the taxpayer was not exempt from paying duty on the acquisition of units in AWPT5.

Administration

New South Wales: Tax-related transport reforms

 

The New South Wales government has proposed a number of tax-related concessions relating to the road transport industry in joint media release by NSW Minister for Roads and Ports and NSW Treasurer’s joint media release, 18 July 2012. The proposed concessions are: a) abolition of stamp duty on the purchase of new truck trailers by NSW-based transport operators; b) a full rebate of the national charges applied to tri-axle dollies and a 50% rebate of charges applied to all types of tandem-axle dollies; and c) a 50% rebate of the national charges applied to spare trailers owned by operators with one or two hauling units (prime movers and rigid trucks), and no more than five trailers (excluding dollies).

 

 

 

For further information, please contact:

 

Geoffrey Mann, Partner, Ashurst

geoffrey.mann@ashurst.com

 

Noah Obradovic, Ashurst

noah.obradovic@ashurst.com

  

Nika Dharmadasa, Ashurst

nika.dharmadasa@ashurst.com

  

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