Stamp duty update

The Commissioner of State Revenue (Commissioner) has had a win in a recent Western Australian stamp duty case that could significantly widen the scope of the ‘land rich’ measures in Western Australia and other jurisdictions.

Under the WA Stamp Act, an acquisition of a greater than 50% interest in an unlisted ‘land rich’ company, or 90% of a listed ‘land rich’ company, attracts stamp duty as if the purchaser had acquired an equivalent interest in the underlying land and chattels of the company. In broad terms, a company is ‘land rich’ if:

• it has WA land worth $1 million or more, and
• more than 60% of its assets comprise land.

In Epic Energy (WA) One Pty Ltd v Commissioner of State Revenue, the issue was whether two companies (whose significant assets comprised of pipelines, pipeline licences, statutory easements and gas transportation agreements) were ‘land rich’ for the purposes of the former WA Stamp Act. The issue turned on whether the pipelines were land of the companies.

Under the Petroleum Pipelines Act (WA), ownership of the pipelines rested with the companies—if not for this, the parties accepted the pipelines would otherwise constitute fixtures and form part of the underlying land. The Commissioner argued this was sufficient to make the pipelines land or an interest in land owned by the companies. The State Administrative Tribunal (Tribunal) accepted the taxpayer’s argument that ownership of the pipelines, pursuant to the statutory provisions, did not give the companies land or an interest in land. This was consistent with a recent High Court decision concerning a similar statutory provision covering the ownership of railway infrastructure.

However, the Tribunal did accept the Commissioner’s argument that the extended definition of land in the land rich provisions was sufficient to catch the pipelines. This definition extends the meaning of land to include ‘anything fixed to the land, including anything that is, or purports to be, the subject of ownership separate from the ownership of the land’. The Tribunal accepted the taxpayer’s argument that the company in question must first have some interest in land before the extended definition can apply to it. However, the Tribunal found that as the majority of the pipeline was covered by pipeline easements, which were interests in land, the extended definition of land was enlivened and those parts of the pipeline attached to the land covered by the easements needed to be included.

The decision is concerning for taxpayers as, on one view, it supports the proposition that where something is fixed to land, and a company has an interest in the land (no matter how slender), then the taxpayer will need to include the full value of the fixed item if it is, or purports to be, separately owned from the land. There are many examples of this in the mining industry and this decision could therefore have an impact on the stamp duty payable on acquisitions of mining companies and associated infrastructure and service providers.

In Western Australia, the Stamp Act provisions have now been rewritten by provisions in the Duties Act which seek to remove some of this uncertainty—they suggest it is only necessary to include the fixed item in land of a company to the extent it has some entitlement over or in the fixed item. However, the drafting in the new provisions is by no means clear. Provisions in Queensland, Northern Territory and South Australia closely mirror the former Western Australian provisions and the potential anomalies arising from the Commissioner’s arguments will have some continued relevance there.

The taxpayer is appealing the decision. It is hoped that greater clarity on some of these issues will be achieved in the Court of Appeal. Freehills acts for the taxpayer.

This article was written by Nick Heggart, Partner, Perth.

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