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Australia – August 2013 Stamp Duty Developments.

19 September, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Tax


WHAT YOU NEED TO KNOW


This Bulletin outlines Australian stamp duty developments in August 2013, which may impact your business, including:


Administration

 

  • QLD: Duties Regulation 2013 (Qld) – the Duties Regulations 2013 (Qld) were made to refresh the 2002 regulations. The regulations commenced on 1 September 2013.SA: Stamp Duties Regulation 2013 – the Stamp Duties Regulation 2013 (SA) were made to refresh the 2002 regulations. The regulations commenced on 22 August 2013.


Transfer Duty

 

  • NSW: CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1072 – the New South Wales Supreme Court has found that the transfers of units in a land rich property trust were exempt from duty under the Duties Act 1997 (NSW).
  • VIC: Lend Lease Development Pty Ltd v Commissioner of State Revenue [2013] VSCA 207 – the Victorian Supreme Court of Appeal has allowed the taxpayer’s appeal against the earlier decision affirming duty, holding that infrastructure and construction works costs amounts are not consideration for the assessment of duty.
  • SA: Growthpoint Properties Ltd v Commissioner of State Taxation [2013] SASC 131 – the South Australian Supreme Court has dismissed a taxpayer’s appeal, against the decision of the Treasurer disallowing an objection against an assessment for land rich duty.
  • QLD: Public Ruling update – The Queensland OSR has released an update to Public Ruling DA000.72 in relation to the duty relief on the acquisition of rural properties for farm rationalisation purposes and to Public Ruling TAA060.14 regarding remission of unpaid tax interest.

 

Relevant Area At a glance
Administration QLD: Duties Regulation 2013 (Qld)

On 16 August 2013 the Duties Regulation 2013 (Qld) were made. The Regulation replicates the Duties Regulation 2002 (Qld), which were to expire

The provisions in the Duties Regulations 2002 are required for the continued operation of the Duties Act 2001 (Qld).


The 2013 Regulations commenced on 1 September 2013.

 

Administration SA: Duties Regulation 2013 (SA)

On 22 August 2013 the Stamp Duties Regulation 2013 (SA) were made. The Regulation revoked and replaced the Stamp Duties Regulations 2002 (SA).

The 2013 Regulations commenced on 22 August 2013.

 

Transfer Duty NSW: CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1072

In CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue, the NSW Supreme Court has held that the transfers of units in a land rich property trust, and the transfer of shares in a NSW company, were exempt from duty and subject to nominal duty respectively under the Duties Act 1997 (NSW) (Duties Act), as the transfers occurred as a consequence of the retirement of a trustee or the appointment of a new trustee.

Facts


A consortium of investors agreed to purchase the Cross City Road Tunnel in Sydney, in an attempt to restore the project which had been in receivership on several occasions. The transactions occurred in 2007 and involved the acquisition of units in the CrossCity Motorways Property Trust (Property Trust) for approximately $692 million as well as the acquisition of shares in CrossCity Motorway Pty Limited (CCM) for approximately $3.4 million.


The Property Trust held the lease of the Tunnel and it also held the tolling right (the right to levy, keep and collect tolls) (Tolling Right). The CCM held the lease of part of the tunnel. The Commissioner assessed both transactions resulting in a total assessment of duty at over $36 million.

The taxpayers sought a review of the assessments of duty.


Held


The three main issues in the Trust proceedings were the following:


1. whether the Property Trust was land rich at the relevant date;


2. if it was, whether the Property Trust transfer was exempt under section 163ZB(1)(i) of the Duties Act; and


3. if it was land rich and the Property Trust Transfer was not exempted, what was the unencumbered value of the land holdings of the Property Trust at the relevant date?


The only issue in the Company proceedings is whether the plaintiff was liable for duty of $10 under s 54(3) of the Duties Act.


After a detailed examination of the characteristics of the Tolling Right, the Court was satisfied that the Tolling Right was not an item of property that was separate from the land. The Court also found that if the right to toll is separate from the land, it is not on interest in land under the Act. Other issues were also discussed, including the value of an intercompany loan and other valuation issues.


Accordingly, the Court found that the Property Trust was land rich at the time of acquisition, and the acquisition of a significant interest in the Property Trust was therefore prima facie liable to duty.


However, the Court then found the acquisition was exempt under section 163ZB(1)(i) of the Duties Act, which provided that an acquisition or disposal by a person of an interest in a landholder is an exempt transaction, if the acquisition or disposal of an interest in a landholder would be chargeable with duty of $10 under section 54 if the property being acquired or disposed of were land in New South Wales.


The acquisition of shares was subject to duty of $10 under section 54(3) of the Duties Act. Section 54 provides duty is chargeable at $10 duty in respect of a transfer of dutiable property as a consequence of the retirement of a trustee or the appointment of a new trustee.


It followed that the Chief Commissioner’s assessments of duty for both transactions were revoked, and the Court made assessments consistent with the findings.

 

Transfer Duty VIC: Lend Lease Developments Pty Ltd v Commissioner of State Revenue [2013] VSCA 207

In Lend Lease Developments Pty Ltd v Commissioner of State Revenue, the Victorian Supreme Court has allowed the taxpayer’s appeal against the earlier decision affirming stamp duty, which included payments made in addition to the price specified under the land sale contract. Refer to our Stamp Duty Bulletin dated 11 April 2012 which discussed the first instance decision.

Facts


Lend Lease Development Pty Ltd (Lend Lease) entered into a development agreement with the Victorian Urban Development Authority (VicUrban). The development agreement did not itself effect a dutiable sale or transfer of land but rather was a kind of governing document for future developments by the taxpayer in the Docklands area (note that it did provide for the future sale of land in stages over time in line with the terms of the development agreement by entering into specific land sale contracts).


Over time, identifiable amounts were paid by Lend Lease to VicUrban for specific parcels of land under specific land sale contracts. Lend Lease was also required to pay other amounts to VicUrban made payable under the terms of the development agreement. Examples of these additional amounts were contributions to external infrastructure (such as roads and pedestrian bridges) and public artwork external to the development, within the Docklands precinct.


The Commissioner sought to assess Lend Lease on the full amounts paid to VicUrban (ie both the amount under the specific land sale contract and the additional amounts payable under the development agreement). Lend Lease argued it should only be assessed on the amounts paid for under the specific land sale contracts as these were full consideration for the land. Lend Lease paid an additional amount of approximately $2.46 million due to the assessments made.


At first instance the Court, held that all the additional payments were part of the consideration for the transfer of the relevant land, in the sense of having “moved” the transfer of that land.


Lend Lease sought an appeal of this decision.


Held


The Court of Appeal allowed the appeal.


The appeal case centred on whether amounts paid by Lend Lease to VicUrban in respect of infrastructure and construction works under the contractual arrangements made under the development agreement, formed part of the consideration for the transfer of the land under section 20(1) of the Duties Act 2000 (Duties Act).


The Court of Appeal found that the primary judge had shifted his focus from the statutory question he was obliged to ask under section 20(1) of the Duties Act, and the evaluation of the transaction of the transfer of the land and came to treat the relevant transfer, for the purpose of assessing duty, as the transfer of the land in the condition it would be once it had been developed. The judge shifted his focus from the nature of the dutiable property that was transferred, to the land developed.


The Court of Appeal found that the judge should have held that the consideration for the transfer of land was the price specified in the Land Sale Contract only, and that each of the contribution payments was “for” something other than the transfer of the land.

 

Transfer Duty / Land Rich Duty SA: Growthpoint Properties Ltd v Commissioner of State Taxation [2013] SASC 131

In Growthpoint Properties Ltd v Commissioner of State Taxation, the SA Supreme Court dismissed the taxpayer’s appeal against the decision of the Treasurer disallowing an objection against an assessment for land rich duty under the Stamp Duties Act 1923 (Duties Act).

Facts


At the time of the relevant transaction involving units in Growthpoint Properties Australia Trust (Trust), the Trust held interests in land in South Australia.


On 5 August 2009, Growthpoint Properties Limited (Growthpoint) acquired through an upfront placement, 50.1% of the issued units in the Trust. Before 5 August 2009, the top 20 registered unitholders held 51.7% of the issued shares (ie they held less than 75% of the issues units). After Growthpoint acquired units through the upfront placement, the top 20 unitholders held 75% or more of the issued units in the Trust. As a consequence, the Trust

became a private unit trust scheme. On 24 September 2009, Growthpoint participated in a rights issue, whereby it increased its interest to 68.12% of the units in the Trust. It also acquired on the same date further units through underwriting, so that Growthpoint held 76.18% of the units in the Trust.


The Commissioner of State Taxation issued to Growthpoint a notice of assessment for $2,991,727.90 and subsequently an amended notice of assessment for $2,991,272.90. Growthpoint lodged objections to both notices of assessments. These objections were disallowed by the Treasurer.


Growthpoint appealed against the decision of the Treasurer to disallow the objections.


Held


The Supreme Court dismissed the taxpayer’s appeal.

The issues for the Court were as follows:


1. whether the acquisition under the upfront placement gave rise to any liability to land rich duty;


2. in determining [1], whether section 95 can only apply to acquisitions in a “land rich entity” if, at the time of the acquisition, the entity was a “land rich entity”, or whether section 95 can also apply where, as a result of the acquisition (as occurred here), the entity becomes a “land rich entity”; and


3. if the answer to [1] is “no”, the appropriate calculation of stamp duty on the “rights issue” and “underwriting” transactions.

 

The Court stated that section 95 should be given its plain meaning. Section 95(1) provides that a person or group that acquires a significant interest or increases its significant interest in a land rich entity notionally acquires an interest in the underlying local land asset of the land rich entity, and is liable to duty in respect of the notional acquisition. The Court held that the relevant test is to look at the result of the transaction, that is to the consequence of the transaction, and to consider whether the transaction has resulted in the person or group having a significant interest in a land rich entity or, alternatively, increasing its significant interest in a land rich entity.


The Court found that as a result of the transaction on 24 September 2009, the taxpayer increased its significant interest in the land rich entity and section 95(2) applied. This meant that both the 5 August and 24 September transactions were liable to duty.


Following this, the appeal was dismissed and the amended notice of assessment was confirmed.


The taxpayer has lodged an appeal.

 

Transfer Duty Qld: Revenue Ruling Update DA000.7.2 – Farm rationalisation scheme

The Queensland Office of State Revenue has updated Public Ruling DA000.7.2. The update is in relation to transfer duty relief on acquisition of rural properties for farm rationalisation purposes.

The update clarifies that the duty relief is only available for transactions entered into before 31 August 2013. After this date, the relevant scheme will be discontinued.

 

Unpaid Duty Qld: Revenue Ruling Update TAA060.1.4 – Remission of unpaid tax interest

The Queensland Office of State Revenue has updated the Public Ruling TAA060.14. The update is in relation to the remission of unpaid tax interest.

The update includes circumstances where payment has been made in error to another jurisdiction as an exceptional circumstance that might justify remission of unpaid tax interest. The other examples of exceptional circumstances remain unchanged.


The update has affect from 16 August 2013.

 

 

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For further information, please contact:

 

Geoffrey Mann, Partner, Ashurst
geoffrey.mann@ashurst.com


Nika Dharmadasa, Ashurst
nika.dharmadasa@ashurst.com

 

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