On 17 August 2017, the Tasmanian Treasurer introduced the Duties Amendment (Landholder and Corporate Reconstruction and Consolidation) Bill 2016 was introduced into the Tasmanian House of Assembly.
The Bill will amend the Tasmanian Duties Act to replace their ‘land-rich’ provisions with ‘landholder’ provisions and also to introduce their ‘corporate reconstruction’ exemptions into the Act (rather than have them dealt with administratively). The amendments will commence on the day the Bill receives Royal Assent.
‘Landholder’ Duty Changes – details from Second Reading Speech
The proposed Tasmanian landholder model is similar in intent to that of other jurisdictions.
Some elements of the landholder model are similar to those in the current land-rich model while others are different.
A key element that remains unchanged between the models is the duty liability threshold of $500 000. Once the value of an entity’s total land holdings meets the $500 000 threshold, the acquisition of a significant interest in an entity will be subject to the landholder provisions.
Many of the exemptions and concessions available for direct transfers of land will also apply under the landholder provisions. In addition, where a rural property transfers between particular family members, a duty exemption continues to be available under the Act.
A key difference is that the landholder model does not contain a land ratio test. This test requires that a company’s land assets make up 60 per cent or more of the total assets of the company in order for the company to be considered land-rich. Removing this test removes some of the difficulty for taxpayers in determining whether an entity is a landholding entity. This reduces complexity while providing greater certainty to taxpayers and their representatives.
Under the landholder model, public landholders (that is, listed companies and public unit trust schemes) will be subject to the duty provisions. This is a common feature of the landholder models in most jurisdictions.
Further, it more closely aligns with the treatment of direct transfers of land under the Duties Act, promoting greater equity in the treatment of dutiable property.
While an acquisition of 50 per cent or more interest will trigger a significant interest in private landholders, and hence a requirement to pay duty; duty will be payable when a 90 per cent or more interest is acquired in a public landholder. This recognises that shareholders of listed companies have less ability to influence the use, disposal and distribution of company-held land upon a company’s wind-up. It is also the point at which a bidder may compulsorily acquire all shares in a listed company.
Extract from Second Reading Speech – ‘Corporate Reconstruction Provisions’
Madam Speaker, I now turn to provisions in the Bill that create a statutory duty exemption for genuine corporate reconstructions. Currently, a corporate reconstruction or consolidation in Tasmania attracts a duty liability under the Act where a direct or indirect acquisition of land occurs.
A corporate reconstruction refers to the internal reorganisation of a company structure through either a corporate reconstruction or a corporate consolidation. A reorganisation is typically undertaken to improve efficiency and can be achieved through either the transfer of shares, units or land amongst commonly controlled or related entities.
The new statutory provisions allow a full exemption from duty for internal reorganisation of a corporate structure, and enable the Commissioner of State Revenue to grant a full exemption from duty if satisfied that specified criteria are met.
All other states in Australia provide for this type of statutory duty exemption.
Replacing existing administrative process, where the Treasurer is currently able to consider individual requests for assistance to refund duty for genuine internal corporate restructures, should provide taxpayers and administrators with greater transparency, certainty and a more streamlined process for accessing an exemption from duty.