Duties Amendment (Land Rich) Act 2003
The amendments to the current "land rich" provisions took effect from 14 November 2003, being the date of introduction of the Bill.
The concept of a private corporation has been replaced with the concept of a landholder which includes private companies, private unit trust schemes and wholesale unit trust schemes.
Unit Trust Definitions
A private unit trust scheme is a unit trust scheme that is not a public unit trust scheme or a wholesale unit trust scheme.
A public unit trust scheme means a listed trust, a widely held trust or an imminent public trust.
A wholesale unit trust scheme is, broadly, a unit trust scheme in which not less than 80% of the units are held by investors who are trustees of certain funds or trusts and in which each such investor holds less than 50% of the units, or a unit trust scheme which it is anticipated will become a wholesale unit trust scheme within 12 months.
Landholder Liability
The test of whether a landholder is "land rich" is changed in two respects.
first, the unencumbered value of the landholder's New South Wales land holdings is increased from $1,000,000 to $2,000,000.
second, the proportion of the total land holdings of a landholder to the unencumbered value of all its property is reduced from 80% to 60%.
In calculating the unencumbered value of a landholder's property, the current duplication of discretions vested in the Chief Commissioner of State Revenue is removed (these were in sections 107(2) & 110(2)).
The Act will now provide for the effect of uncompleted agreements for the disposal or acquisition of property other than land in addition to the current provisions for uncompleted agreements relating to transfers of land (section 108(2)).
The constructive ownership of land and other property in the current provisions of the Act may be traced through a subsidiary of a private corporation or through a discretionary trust. These provisions, in so far as they apply to subsidiaries, are replaced with provisions that enable the ownership trail to be traced through linked entities.
A link exists if a person would be entitled to receive not less than 20% of the unencumbered value of the property of another person, if he other person were to be wound up (s109(2)).
What Acquisitions are Liable?
The Act makes changes to the way in which interests in a landholder may be acquired. It replaces the requirement for the acquisition of a majority interest, which was an entitlement to more than 50% of the property of a private corporation in the event of a distribution of all of the property of the private corporation, with the requirement for the acquisition of a significant interest in a landholder.
A significant interest is an entitlement, in the event of a distribution of all of the property of the landholder, to 20% or more of the property in the case of a private unit trust scheme or 50% or more of the property in the case of a wholesale unit trust scheme or private company (s111(2)).
The manner in which an interest may be acquired is updated to accord with current business practice (s112).
Liability for duty is incurred when a person makes a relevant acquisition in a landholder. A relevant acquisition is made when a person acquires:
(a) a significant interest in a landholder, or
(b) an interest which, when aggregated with interests of the person or associated persons, amounts to a significant interest, or
(c) an interest which, when aggregated with other interests acquired by the person or other persons acting under transactions that comprise substantially one arrangement between the acquirers, amounts to a significant interest.
A relevant acquisition is also made when a person who has a significant interest in a landholder, or an interest which, when aggregated with interests of the person or associated persons, amounts to a significant interest, acquires a further interest in the landholder.
Concessions
A concession is made for primary producers. If a landholder is a primary producer when a relevant acquisition is made and the landholder’s land holdings in all places, whether within or outside Australia, comprise less than 80% of the unencumbered value of all its property, no duty is chargeable in respect of the acquisition. However, duty will become chargeable if the landholder ceases to be a primary producer at any time within 5 years after the relevant acquisition is made.
Various changes are made to the exception of interests from the land rich provisions. The exception of an acquisition comprising a transaction that is not liable for transfer duty under the general provisions of the Act is removed. Further exceptions are made in relation to intergenerational rural transfers and the acquisition of interests by certain charitable or benevolent societies or institutions.
Legislation Details
The current provision for the phasing-in of duty (section 122) is repealed and is not replaced.
Other provisions in Parts 1 and 2 of Chapter 3 are re-enacted without amendment, except for minor amendments or consequential amendments.
The Schedule of amendments to the Act also includes savings and transitional provisions necessitated by the amendments.
For full details of the legislation, visit the NSW Parliamentary website.
