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Stamp Duty and Land Rich Companies and Trusts

The land rich provisions in the Duties Act were introduced in 1987 at a time when the New South Wales Government was concerned that it was missing out on duty when property owned by companies or trusts was being transferred by a sale of the shares in the company or units in the trust as opposed to the company or trust transferring the property.

Where a transfer of the property would have attracted duty at conveyance rates of up to 5.5%, a transfer of shares or units in a trust was dutiable at 0.6%, a saving of duty of approximately $50,000 per million dollars of land value.

The land rich provisions imposed duty at conveyance rates when a majority interest in land rich companies and trusts was acquired.

On 1 January 2004, the Duties Act was amended in a manner which significantly changed the imposition of stamp duty in relation to land rich companies and private unit trusts.

Broadly speaking, duty was imposed prior to 1 January 2004 if:

  1. a company or trust was land rich, i.e. more than 80% of its assets (excluding cash and loans to related parties) were constituted by land or interests in land and the unencumbered value of the land was $1 million or more (“the threshold test”);
  2. a majority interest was acquired in the land rich company or trust (“the acquisition test”). An acquisition can occur by way of a transfer, purchase, gift, redemption, cancellation or surrender of a share or unit.

On 1 January 2004, both the threshold test and the acquisition test changed.

Threshold Test

The threshold test is now met if a company or private unit trust scheme has land in New South Wales with an unencumbered value of $2 million or more and the company or trust’s total land holdings in or outside New South Wales comprises 60% or more of the unencumbered value of all its assets (excluding cash and loans to related companies).

Acquisition Test

The acquisition test has changed from acquiring a majority interest to:

  1. in relation to companies, acquiring a 50% interest or greater; and
  2. in relation to private units trusts, acquiring a 20% interest or greater.


Care should be taken when contemplating a transfer or allotment of shares or units in land rich companies and trusts to ensure that the stamp duty consequences are fully understood.

Care also needs to be taken when considering the balance sheet of the company or trust. There may be assets which are included as land which, when properly considered are separate to the land owned by the company or trust.

There may also be other assets such as goodwill which are not accounted for in the company’s or trust’s accounts which can properly be included to determine whether it is in fact land rich.

Regard should also be had to complex provisions in the Duties Act which relate to aggregating interests of related parties.

If you need further information or have any queries please contact Ian Smith.

This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. The publication reflects the law at the date the publication was written which may differ at the date the publication is being read. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice.
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