Duties Act (Vic) amended

The Victorian Duties and Land Tax Acts (Amendment) Act 2005 (Act) received royal assent on 29 November 2005. Relevantly, the Act amends the land-rich duty provisions of the Victorian Duties Act 2000 and these amendments commenced operation on 30 November 2005.

The major proposed amendments to the land-rich duty provisions include the following.

Definitions

A change to the definition of 'listed trust', in relation to trusts listed on a foreign exchange, to only include foreign exchanges which are approved by the Commissioner of State Revenue (commissioner).

An addition to the definition of 'private company' to include a company that the commissioner declares to be 'private company', where the commissioner determines that the listing had a collateral purpose of avoiding or reducing land-rich duty.

Widely held unit trusts

• The definition of 'widely held trust' has been amended to require the following conditions to be met:

• the trust must be a managed investment scheme
• the trust must have at least 300 unitholders
• units must have been offered to the public, and
• none of the registered unitholders may hold or be entitled to more than 20 per cent of the units.

• Where a registered unitholder holds units as a trustee of a number of different trusts, the unitholder is taken to be a separate registered unitholder in relation to each trust and the units held are taken to be separate unitholdings, except where the beneficiaries of the trusts are the same or associated persons. This clarifies the treatment of multiple holdings of units by a trustee.

Land-rich calculation

• In calculating the land-rich ratio (ratio of landholdings to total property), it will no longer be permissible to include as a 'non land' asset any debts existing between a landholder and a linked entity.
• For the purposes of the land-rich provisions, put options and call options will both be treated as uncompleted agreements for the sale of land. Therefore a purchaser under an option will be deemed to hold the entire land, simultaneously with the vendor.

Acquisitions of interests

• A person who holds an interest in a land-rich landholder will be deemed to acquire an interest in the landholder if the capacity in which the person holds the interest changes. Therefore a person who holds an interest in a land-rich landholder as trustee for trust A, will be deemed to acquire an interest if that person begins to hold as trustee for trust B.
• A person who has a beneficial interest in a land-rich landholder and who declares a trust over that interest is also deemed to have acquired an interest in the landholder, in the new capacity as trustee.
• The definition of 'relevant acquisition' has been expanded, so that a person who acquires interests that, when aggregated with the following transactions amounts to a significant interest of 20 per cent or more in the trust, namely: 
  • interests acquired by the person or an associated person within the preceding three years, and
  • interests acquired under associated transactions within the preceding three years,

will be deemed to make a 'relevant acquisition'. Previously the interests acquired by the person or associated persons within the preceding three years were not aggregated with associated transactions. Therefore the number of transactions subject to land-rich duty will be increased significantly.

• For the purposes of the land-rich provisions, qualifying investors of a wholesale unit trust scheme will be deemed not to be 'associated persons' of other qualifying investors in relation to the scheme.

Registration of unit trust schemes

• The definition of 'qualified investor' is expanded to include a person who holds units in the unit trust scheme as custodian or trustee for an investor directed portfolio service.
• The commissioner can impose conditions in relation to the registration of a ‘declared wholesale unit trust scheme’ and a ‘declared public unit trust scheme’. The commissioner can cancel the registration of a registered unit trust scheme, if a condition of registration has not been met (unless the commissioner considers that it would not be just and reasonable).

For more information please contact

Name : Steven Stevens
Title : Partner
Office : Melbourne
Phone : +61 3 9288 1241
Fax : +61 3 9288 1567
Email : steven.stevens@freehills.com

Name : Richard Giannone
Title : Partner
Office : Sydney
Phone : +61 2 9225 5326
Fax : +61 2 9322 4000
Email : richard.giannone@freehills.com

Name : Matthew Stutsel
Title : Partner
Office : Sydney
Phone : +61 2 9225 5065
Fax : +61 2 9322 4000
Email : matthew.stutsel@freehills.com