Land-rich changes in South Australian 2006–07 Budget

The recent South Australian Budget for 2006–07 has announced a number of significant changes to land-rich duty. The changes will apply to transactions entered into on or after 22 September 2006.

• One of the threshold tests for whether an entity is land-rich is the land-rich ratio (ie value of land assets / value of total assets). The threshold has been reduced from 80 per cent to 60 per cent, except for primary production entities. This means that more entities are now land-rich. 
• Contractual rights are generally excluded from the total assets in the land-rich ratio. However, they can now be included if the commissioner is satisfied that they were acquired in the normal course of business and not as part of an arrangement to avoid duty. This will benefit service industries, where contracts are significant valuable assets.
• The value of land in the land-rich ratio can now include anything fixed to the land, even if it is separately owned from the land. This does not apply if the commissioner is satisfied that the separate ownership was not to avoid duty. This provision will affect transactions such as finance leases of plant and machinery, where the plant would be fixed to land.
• Land-rich duty is now imposed on acquiring a ‘significant interest’, rather than a ‘majority interest’. A significant interest is 50 per cent or more for both companies and trusts (by comparison, New South Wales and Victoria have a threshold of 20 per cent or more for trusts).
• In addition, it is not just ‘associated’ persons who will have their acquisitions aggregated. The land-rich provisions now aggregate all transactions within a three-year period if:
  • the persons acted in concert, or 
  • the acquisitions are substantially one arrangement, one transaction or one series of transactions.

The land-rich provisions in South Australia (and throughout Australia) are extremely complex. These changes just add to that complexity. Our team of advisors has experience dealing with these issues. Please contact one of the partners below to find out how they can help you.

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

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

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