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Land rich acquisition duty

From 1 July 2009 landholder duty replaces the land rich provisions.

Land rich acquisition provisions

The acquisition provisions, which were first introduced in 1987, charge duty on certain acquisitions of interests in land rich landholders at the same rate as for a transfer of land.

A landholder includes any of the following:

  • a private unit trust scheme
  • a wholesale unit trust scheme
  • a private company.

These terms are defined in the dictionary of the Duties Act 1997.

What makes a landholder land rich?

A landholder is land rich if:

  • it has land holdings in NSW with an unencumbered value of $2 million or more

  • its landholdings in all places, whether within or outside Australia, comprise 60% or more of the unencumbered value of all its property (except for certain excluded property).  

The land holdings of any linked entity are also included when determining whether a landholder is land rich.

A unit trust scheme or a private company (the principal entity) is also considered to hold an interest in land held by a linked entity, that is, a person:

  • who is part of a chain of persons:

    • which includes the principal entity

    • which is comprised of one or more links

    • who are not linked to the principal entity by a public unit trust scheme, a wholesale unit trust scheme or a company whose shares are listed on the Australian Stock Exchange or an exchange of the World Federation of Exchanges

  • who is not a public unit trust scheme, a wholesale unit trust scheme or a company whose shares are listed on the Australian Stock Exchange or an exchange of the World Federation of Exchanges.

The value of the interest held via a linked entity is that portion of the unencumbered value of property the unit trust scheme or private company would be entitled to if each entity in the chain was wound up.

Who is responsible for paying duty?

Duty is payable by a person who makes a relevant acquisition in a land rich landholder.

If a relevant acquisition results from an aggregation of the interests of associated persons, the person who made the relevant acquisition and the associated person or persons are jointly and severally liable for payment of the duty.

The term 'associated person' is defined in the dictionary of the Duties Act 1997.

A person makes a relevant acquisition if the person:

  • acquires an interest in a land rich landholder:

    • that is of itself a significant interest in the landholder; or

    • that, when aggregated with other interests in the land holder held by the person or an associated person, results in an aggregation that amounts to a significant interest in the landholder; or

    • that, when aggregated with other interests in the landholder acquired by the person or other persons under transactions that form, evidence, give effect to or arise from what is substantially one arrangement between the acquirers, results in an aggregation that amounts to a significant interest in the landholder; or

  • has a significant interest, or an interest described in paragraph (a)(ii) above, in a land rich landholder, and acquires a further interest in the landholder.

You have an interest in a landholder if you have an entitlement (other than as a creditor or other person to whom the landholder is liable) to a distribution of property from the landholder if the landholder is wound up.

You have a significant interest in the landholder if, in the event of a distribution of all the property of the landholder immediately after the interest was acquired, you would be entitled to:

  • in the case of a private unit trust scheme:

    20% or more of the property distributed

  • in the case of a landholder other than a private unit trust scheme:

    50% or more of the property distributed.

Note: an interest in a landholder is not counted if the interest concerned:

  • is an interest in a unit trust scheme acquired before 10 June 1987
  • is an interest in a private company acquired before 21 November 1986
  • was acquired at a time when the landholder did not hold land in NSW.

Acquiring an interest

You acquire an interest in a land rich landholder if you obtain an interest, or your interest in the landholder increases, regardless of how it is obtained or increased (for example by a purchase of shares or units).

From 2 April 2008, a change in the capacity in which a person holds an interest in a land rich landholder is regarded as an acquisition of an interest in the landholder. For example, if a person who holds a share or unit in a land rich landholder declares a trust in respect of the share or unit.

If you have made a relevant acquisition, you must lodge the 'Acquisition Statement: Acquisition of an Interest in a Land Rich Landholder' (ODA 043) form with the Chief Commissioner.

How is duty calculated?

  1. Where an acquisition statement does not disclose any acquisitions during the 3 years preceding the relevant acquisition

    Duty is chargeable at the transfer of land rate (1.25 – 5.5%) on the amount calculated by multiplying the unencumbered value of all land holdings of the landholder in NSW (calculated at the date of acquisition of the interest acquired) by the proportion of that value represented by the interest acquired in the relevant acquisition.

  2. Where an acquisition statement discloses one or more acquisitions during the 3 years preceding the relevant acquisition, (including any interests acquired by associated persons on the same date)

    Duty is chargeable at the transfer of land rate on the aggregate of the amounts severally calculated using the method described above for each interest required to be disclosed in the statement.

Example

XYZ Pty Ltd is a landholder. On 1 March 2004 the company acquired realty in NSW valued at $4 million and became a land rich landholder.

  1. Mr X acquired 20% of the shares of the company before the company acquired land in NSW.

  2. Mr X acquired another 40% of the shares on 2 March 2004. There is no liability to land rich acquisition duty at this stage because Mr X's original acquisition is not counted and the 40% acquisition is not a significant interest.

  3. Mrs X acquired 10% of the shares on 30 January 2005 when the realty is valued at $5 million. Mrs X's acquisition results in Mr and Mrs X acquiring a significant interest and therefore that acquisition is a relevant acquisition.

Because the acquisition in step 2 occurred within 3 years of the relevant acquisition in step 3, duty is payable at the transfer of land rate on the aggregate of these amounts severally calculated for each interest. That is:

Acquisition 2: 40% multiply by $4 million = $1.6 million

plus

Acquisition 3: 10% multiply by $5 million = $500,000

Total duty is paid on $2.1 million ($1.6 million + $500,000) = $100,990.

The acquisition in step 1 is disregarded because it was acquired at a time when the landholder did not hold land in NSW.

Credit to prevent double duty

To prevent the payment of double duty in respect of a relevant acquisition, the duty payable on the acquisition statement will be reduced by:

  1. any duty paid previously in respect of any earlier acquisition which must be disclosed on the current statement, and

  2. a proportion of the duty payable on the share or unit transfer.

See Section 163K of the Duties Act 1997 for more information.

When must duty be paid?

You must pay duty within 3 months of when you make the relevant acquisition.

What evidence of value is required?

You must lodge a formal valuation or any other document the Chief Commissioner considers to be appropriate (e.g. a stamped agreement for sale of land), for each of the landholder's land holdings owned as at each acquisition date that you have disclosed in your Acquisition Statement.   

What acquisitions are exempt?

Deceased estates

An acquisition is exempt if you acquired the interest in your capacity as the executor or administrator, or solely as the result of the distribution of the estate of a deceased person.

Relationship breakdown

Certain acquisitions following the breakdown of a marriage or domestic relationship are exempt from duty.

For information on other exemptions, contact us.

Note: interests acquired under exempt acquisitions are counted as 'interests' for the purpose of determining whether a person has a significant interest.

Primary producers – special provisions

A primary producer is a landholder whose land holdings wholly or predominantly comprise land used for primary production, as defined in Section 274 of the Duties Act 1997.

If you acquire a relevant interest in a primary producer whose land holdings represent 60% or more but less than 80% of the unencumbered value of all their property, no duty is chargeable but you must lodge an acquisition statement.

Note: if, at any time within 5 years of your acquisition, the landholder ceases to be a primary producer, you must notify the Chief Commissioner.

You will then be assessed for duty on your acquisition, with duty chargeable on the date when the landholder ceased to be a primary producer.

Registration of unit trust schemes

The responsible entity of a unit trust scheme may apply to the Chief Commissioner for registration of the scheme as:

  • an imminent public unit trust scheme
  • a wholesale unit trust scheme
  • an imminent wholesale unit trust scheme.

Applicants wishing to register should complete the Application for registration of a unit trust scheme (ODA 045).

The Chief Commissioner may register the unit trust scheme if satisfied that the scheme meets the criteria for registration. These criteria are listed in Part 7 of Chapter 4A of the Duties Act 1997.

In the absence of registration, any unit trust scheme other than a listed trust or a widely held trust will be treated as a private unit trust scheme for the purposes of acquisition duty. That is, significant interests will be defined as interests of 20% or more in the land rich landholder, rather than 50% or more.

View the register of wholesale unit trusts.

For more information on land rich duty, contact us.

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1300 139 814*
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Last updated: 21 August 2017