We all know that selling a piece of land in Victoria will attract stamp duty, but what about if the land is owned by a company and it is the shares that are being sold? So in other words, even though the direct owner of the land (the company) hasn’t changed, the underlying beneficiaries (shareholders) have changed. The answer is yes, the transaction may also attract stamp duty.
When Do the Rules Apply?
When you acquire shares in a company or units in a unit trust that has land holding in Victoria of $1 million or more, you may be liable to pay stamp duty. This is called the landholder duty. Discretionary trusts are generated excluded.
For the landholder duty rules to apply, a significant percentage of shares or units (‘significant interest’) must have been acquired. The table below lists the percentages required to be qualified as significant interest for different types of entities:
Note that the acquisition of a significant interest does not have to happen in a single transaction. The State Revenue Office (SRO) will take into account all relevant transactions (that may each be below the relevant threshold) in aggregation. The SRO will also look at acquisitions made by the purchaser’s associates which generally include related persons, companies that have common majority shareholders and trusts that have common beneficiaries.
Calculation of Landholder Duty
The duty is charged on the dutiable value at the general rate. The following examples are from the SRO website.
Example 1: single interest acquired from a private company:
When the acquisition of interest in a landholder happens in several transactions over time, the percentage acquired in all transactions (regardless of time of the transaction) are added up to determine if the significant interest threshold has been reached. However, even when the threshold has been reached and the acquisition has become an acquisition of significant interest, only the transactions that happened in three years preceding to the acquisition of significant interest are taken into account to calculate dutiable value. This is demonstrated in the example below where an acquisition comprises of four 6% interests acquired over four years.
Example 2: aggregated interests acquired over time from a private unit trust:
Note that when the land owner’s landholdings in Victoria are between $1 million and $2 million, duty is calculated using the phasing-in formula. For example, duty on a 100% interest acquisition of a private company whose landholding in Victoria is valued at $1.2 million is calculated as:
($1.2 million - $1 million)/$1 million x (5.5% x $1.2 million) = $13,200
What Do You Need To Do?
When the landholder duty applies, you must notify the SRO within 30 days of your relevant acquisition in the landholder by lodging an acquisition statement.
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