Major WA stamp duty reform still headed for 1 July 2008 start date

The Bill

Following public consultation on the exposure draft of the Duties Bill 2007 (WA), a revised version of the Bill was introduced into the Western Australian Parliament on 28 November 2007.

The final Bill represents a complete overhaul of the Western Australian Stamp Act and also contains several significant reforms.

The exposure draft of the Duties Bill 2007 (WA) was reviewed in our previous article. This article highlights the significant changes between the exposure draft of the Bill and the Bill introduced into the Western Australian Parliament.

In introducing the Bill into parliament, the Western Australian Treasurer has reaffirmed his commitment to have the new Act in place by 1 July 2008.

Transfer duty provisions

The application of the transfer duty provisions to rights and to ‘new dutiable property’ have been narrowed.

The provisions allowing a refund or reduction of duty on a cancelled transaction have been amended following a recent Supreme Court decision in Western Australia.

Transactions involving carbon rights and carbon covenants will not attract stamp duty.

Corporate reconstruction exemption

Transitional rules have been inserted which confirm that a transaction which is the subject of an exemption under the current corporate reconstruction exemption will not be subject to a claw back of stamp duty on or after 1 July 2008. The corporate reconstruction exemption allows an exemption for transfers of property within certain corporate groups. Without the transitional rule, the claw back would apply if the transferor and transferee received an exemption before 1 July 2008 but ceased to be members of the same corporate group within five years of receiving the exemption. There is no claw back under the new corporate reconstruction provisions applying from 1 July 2008 and this measure therefore provides consistency of treatment from 1 July 2008.

The new corporate reconstruction exemption has been extended to allow the interposition of a new unit trust at the head of a stapled group. This reflects recent amendments to the income tax law, to provide a roll-over for such a transaction under the income tax consolidation rules.

Landholder regime

As noted previously, a company or unit trust will be a landholder if it holds $2 million of Western Australia land directly or indirectly through one or more ‘linked entities’. The definition of a ‘linked entity’ has been narrowed from an entity in which there is a 20 per cent or greater interest to:

• an unlisted entity in which there is a 50 per cent or greater interest, and
• a listed entity in which there is a 90 per cent or greater interest.

The Commissioner of State Revenue will have the power to extend the time period for lodgement of landholder acquisition statements. This is important as, under the new rules, a land rich statement must be lodged at the time of any agreement to acquire a significant interest in a landholder (even if conditional) and not at the time of completion of the acquisition.

A discretion has been introduced which allows the commissioner to treat acquisitions by related parties as having been made separately. Ordinarily such acquisitions are aggregated. However, the discretion is not available in respect of acquisitions by related corporations.

General anti-avoidance provision

The Treasurer has rejected calls for a system of private binding rulings. However, the Bill does provide for a system of private binding rulings in relation to the application of the general anti-avoidance provision. The system will allow taxpayers to apply to the Commissioner of State Revenue for a ruling as to whether the commissioner will invoke the general anti-avoidance provision. It is unclear how useful such a limited ruling process will be. The fact that a taxpayer asks for a ruling on the application of the general anti-avoidance provision may of itself prove persuasive in the commissioner’s decision.

Transitional rules

There are various transitional rules which cover the transition to the Duties Act. In general, the transitional provisions are not too tough and, subject to the application of the general anti-avoidance provision, there may be some scope for planning in relation to, amongst other things:

• the abolition of Western Australian mortgage duty from 1 July 2008
• the removal of Western Australian stamp duty on the acquisition of a less than 50 per cent interest in a unit trust from 1 July 2008
• the removal of Western Australian stamp duty on the acquisition of an interest in a ‘non land rich’ unit trust from 1 July 2008, and
• the abolition of Western Australian stamp duty on the acquisition of ‘business assets’ from 1 July 2010.

For more information please contact

Name : Nick Heggart
Title : Partner
Office : Perth
Phone : +61 8 9211 7593
Fax : +61 8 9211 7878
Email : nick.heggart@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 : Steven Stevens
Title : Partner
Office : Melbourne
Phone : +61 3 9288 1241
Fax : +61 3 9288 1567
Email : steven.stevens@freehills.com

Name : David Stitt
Title : Consultant
Office : Brisbane
Phone : +61 7 3258 6621
Fax : +61 7 3258 6444
Email : david.stitt@freehills.com