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When a corporate group changes structure such as a corporate reconstruction or corporate consolidation, the corporation may be liable for transfer duty or landholder duty.
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Section 273B of the Duties Act provides for an exemption for certain corporate reconstruction and corporate consolidation transactions that occur prior to 1 February 2024.
For eligible transactions that occur on or after 1 February 2024, the duty is reduced to 10% of the duty that would otherwise be payable.
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 subsidiary must directly or indirectly-
hold at least 90% of the securities of the other corporation, and
The corporate reconstruction reduction in duty applies to an eligible transaction arising as a consequence of a legitimate corporate reconstruction and provides relief from duty on intragroup transactions enabling a corporate group to reorganise its business structure, for example by transferring assets between corporations that are members of the corporate group.
Eligible corporate reconstruction transactions
An eligible corporate reconstruction transaction generally includes any of the following transactions provided they are between members of the same corporate group:
A transfer, or agreement for sale or transfer of dutiable property.
A surrender of an interest in land.
A vesting of dutiable property if the dutiable property was held, immediately before the vesting, and continues to be held, immediately after the vesting.
An acquisition of an interest in a landholder by a corporation if the interest is acquired from another corporation.
An application to register a motor vehicle as a result of a transfer of the vehicle.
A corporate reconstruction transaction does not include a declaration of trust, foreclosure or enlargement transactions, even if between members of a corporate group.
The corporate consolidation reduction in duty enables the interposition of a head corporation between a corporation that is a member of a corporate group and the shareholders or unit holders of that corporation for the purposes of the formation or continuation of a consolidated group.
Eligible consolidation transactions
A corporate consolidation transaction is a dutiable transaction or an acquisition of an interest in a landholder that:
is made to interpose a corporation (the head corporation) between another corporation (the affected corporation) and the holders of the affected corporation’s securities, and
is a transfer or an acquisition of securities of:
the affected corporation by the head corporation for which the only consideration given by the head corporation is the issue or transfer of its securities to the person from whom the affected corporation’s securities were transferred or acquired, or
the head corporation by a holder of securities of the affected corporation.
What is a corporation security
A security of a corporation means:
In the case of a corporation other than a unit trust scheme, an issued share of the corporation, or
for a unit trust scheme, a unit issued under the scheme.
How is the reduction in duty calculated?
Where there is an eligible transaction that occurs on or after 1 February 2024, the duty is reduced to 10% of the duty otherwise chargeable (i.e. a 90% discount)
Example – Duty on an eligible corporate reconstruction transaction
On 1 May 2024, Corporation A transfer a freehold land to Corporation B for $1,000,000. This is an eligible corporate reconstruction transaction met all the relevant requirements under Section 273B.
The corporate reconstruction reduction is calculated as follows:
Dutiable value of property = $1,000,000
General duty rate calculation = $39,735.00
Reduced duty rate = 10% of duty otherwise payable
Corporate reconstruction duty = $3,973.50
Is Surcharge Duty payable?
If you are a foreign purchaser and acquire residential-related property in NSW or you have made a relevant acquisition in a landholder that has an interest in residential land, you may also need to pay Surcharge duty in addition to transfer/landholder duty.
