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Corporate reconstructions and consolidations

The information within this guide is of a general nature and aims to centralise key information on corporate reconstructions and consolidations and provides industry professionals the legislative and operational requirements under the Duties Act 1997.

It is recommended that the guide is read in its entirety and in conjunction with part 1 of chapter 11 of the Duties Act 1997.

Contact us if you require further information or to discuss specific transactions.

Chapters

  1. Overview
  2. What is a corporate group?
  3. Reduction in duty for corporate reconstructions
  4. Reduction in duty for corporate consolidations
  5. Applications for reduction in duty
  6. Lodgement and payment of duty
  7. Definitions

2. What is a corporate group?

A corporate group consists of a parent corporation and its subsidiaries.

To be a parent corporation of another corporation, the parent must directly or indirectly:

  • hold at least 90% of the securities of the other corporation, and
  • hold voting control over the other corporation.

Voting control

The first corporation holds voting control over the other corporation if the first corporation has the ability to cast, or control the casting of, at least 90% of the maximum number of votes that may be cast at a general meeting of that corporation.

Voting control example

The example below demonstrates how Company A has voting control over the subsidiary companies.

The example demonstrates how Company A has voting control over the subsidiary companies

Company B

Company B is a subsidiary of Company A as Company A holds 100% of the shares in, and has voting control over, Company B.

Company C

Company C is a subsidiary of Company B as Company B holds 100% of the shares in, and has voting control over, Company C.

  • Therefore, company B is the parent corporation of company C.
  • As company B is a subsidiary of company A, company C is also a subsidiary of company A.

Company D

Company D is a subsidiary of Company C as Company C holds 100% of the shares in, and has voting control over, company D.

  • Therefore, company C is the parent corporation of Company D.
  • Because Company C is a subsidiary of Companies B and A, Company D is also a subsidiary of Companies A and B.

Company E

Company E is a subsidiary of Company A as Company A holds 100% of the shares in, and has voting control over, Company E.

Company F

Company A is indirectly the parent corporation of Company F, even though no one company holds 100% of its issued shares, nor has voting control, over it. Company F is a subsidiary of Company A because Company A, with its subsidiary Company E, holds 90% of the issued shares in, and has voting control over, Company F.

Company A

As Company A has voting control over B, C, D, E and F

  • Company A is considered the parent corporation and
  • Companies B, C, D, E and F are subsidiaries of Company A.

Read more in Section 273E(3) of the Duties Act 1997

Corporate group test for 'stapled securities'

Stapled securities are where two or more securities are generally related and bound together through one vehicle.

Typically, stapled securities consist of one trust unit and one share in the funds management company that cannot be traded separately.

Stapled securities are created when two or more different securities are contractually bound together so that they cannot be sold separately.

Many different types of securities can be stapled together. For example, many property trusts have their units stapled to the shares of companies with which they are closely associated.

The ‘corporate group’ for a corporation, all of the securities of which are stapled to the securities of one or more other corporations, includes all of those other corporations and their subsidiaries.

Read more in Section 273E(4) of the Duties Act 1997

Stapled securities example

Example showing listed stapled securities consisting of one trust unt and one share in the company that cannot be sold separately

Corporate group test for 'unit trusts'

A corporation that is a ‘unit trust scheme’ is taken to be a member of a corporate group for the purposes of a corporate reconstruction transaction if the transaction is between:

  1. the trustee of the unit trust scheme, acting as trustee of the scheme, and
  2. another corporation that is a member of the same corporate group as the unit trust scheme.

A unit trust is not a member of the group unless members of the group hold at least 90% of the units. This applies even is the trustee is a member of the group.

A unit trust can be the parent of the group - with individuals as unit holders, just as individuals would be shareholders of a parent company.

Read more in Section 273E(5) of the Duties Act 1997

Corporate group test for 'registered managed investment schemes'

Both registered and unregistered Managed Investment Schemes (MISs) may be members of a corporate group.

A reference to a trustee of a registered managed investment scheme in the group includes a custodian of the trustee of the scheme acting as custodian of the trustee of that scheme - see subsections 273E(5) & (5A).

It does not extend to a custodian of the trustee of an unregistered scheme.

Read more in Section 273E(5A) of the Duties Act 1997

Corporations which are 'not' a member of a 'corporate group'

A corporation is not a member of a corporate group if the corporation is acting in the capacity of trustee of:

  1. a unit trust scheme that is not a member of the same corporate group as the other party to the transaction, or
  2. a discretionary trust, or
  3. a trust (not being a unit trust scheme) for any person who is not a member of the corporate group.

Read more in Section 273E(6) of the Duties Act 1997

Subsequent eligible transactions

Corporate reconstruction arrangements can involve multiple steps. This may involve moving the same property more than once (either directly or indirectly) under separate eligible transactions. Each transaction will attract duty at the concessional rate of 10% of the duty otherwise payable.