13 May Changes to the Landholder stamp duty proposed
The Duties Act 1997 (‘the Act’) provides that stamp duty is payable on the acquisition of an interest in a Landholder. Landholder duty is a scheme that was initiated to impose stamp duty on acquisitions in landholding entities. Before being introduced as the landholder regime, it was referred to as the ‘land-rich’ regime, introduced as an anti-avoidance system as acquisition of land through companies or unit trusts were not liable for duty.
Currently, under section 146 of the Act, a company or trust is defined as a landholder if it holds land with a “threshold value”, being that of the unimproved value of the land of $2 million or more in New South Wales. This does not account for the value of structures on the land.
The landholder duty operates to constitute a charge over land on the acquisition of 50% or more interest in a company or unit trust which holds an unencumbered value of $2 million or more of New South Wales land or interest in land (including fixtures).
The State Revenue Legislation Further Amendment Bill 2020 (‘the Bill’) was introduced into NSW Parliament on 22 October 2019. It proposes a number of significant changes to duties imposed under the landholder scheme, including the removal of “threshold value” of land and the expansion of the definition of “land” in relation to the landholder duty.
The Bill proposes to amend section 146 of the Act by replacing the words “a threshold value” with “an unencumbered value”, which means the unencumbered value of the land is now used to determine the threshold. This value includes the value of improvements on the land.
Under the current landholder duty regime, the common law definition of “fixtures” is applied for determining whether a chattel is a fixture and therefore “land”. A fixture is determined by common law as being fixed to land by any means other than its own weight.
The Bill proposes that a chattel, or a “thing”, will be deemed to be land if the “thing” is fixed to the land in any way, including by its own weight. This is through a new section, section 147A, which provides the Chief Commissioner with a discretion to not levy duty on a “thing fixed to land”. This discretion can be used if the thing is not owned by the landholder, and if the thing is not used in connection with the use of the land.
Consequently, if a lessee (non-landowner) company has “things” valued at $2 million or more which are fixed to land, then that company would be deemed a landholder for the purposes of the duty. Similarly, if the company leases land or fixtures with an unencumbered value of $2 million, the leaseholder will be deemed a landholder for the purposes of the duty.
These changes broaden the scope of the landholder duty from its original intention, as well as increase the discretion of Revenue NSW to collect the duty. They will also mean higher landholder duties as less transactions will fall below the $2 million dollar value.
As at May 2020, the Bill has been passed by the Legislative Council and is ready for presentation to the Legislative Council. The Legislative Council next sits on 15 September 2020.
If you require advice as to what this will mean for you or your business, or you would like further information regarding these changes, please contact Ian Smith (firstname.lastname@example.org; (02) 9261 8533).