Despite the decision favouring the taxpayer in Uniqema (where the court rejected the SRO argument that goodwill attaching to a site should be assessable as part of the value of the real estate conveyance) and similar decisions by Harper J in Palace Hotel (2004) and Primelife (Glendale Hostel) (June 2004), the SRO is still issuing adverse assessments to inclde the value of an “integral business” relying on its previous ruling DR.039. Vulnerable situations include the sale of a petrol station, a corner store, a chicken broiler farm, a quarry, or other special use properties. New amendments to the Duties Act have introduced a new concept of “business goods” to capture conveyancing duty on some real estate associated business assets, but goodwill is not mentioned. The SRO issued a ruling on 13 August 2004 requiring a supporting valuation for land transferred with a business where the transfer exceeds $1m and other criteria are met.
Stamp Duty Abolished on Loan Agreements and Mortgages:
The abolition took effect on 1 July 2004. Some lending institutions could take advantage of this change to lift other charges to borrowers. On the other hand, estate planners may consider it cost effective now to secure loan accounts of associated entities to ensure greater asset protection for individual clients.
Land-rich entity rules tightened:
Under the land rich provisions of the Duties Act, conveyancing stamp duty could previously be imposed on transfers of either Company shares or Unit Trust units when 3 criteria were satisfied:
80% of company’s gross assets comprised real estate,
the real estate had a value exceeding $1,000,000; and
the transfer effected a 50% change in ownership of the entity.
The law has been changed so that the 80% threshold has now been reduced to only 60%, and in the case of a private Unit Trust, the triggering equity change is now only 20%. Despite general capital growth in property values, the $1,000,000 threshold has not been increased.
The new law also extends to an acquisition of an interest to include by way of issue, cancellation or redemption of shares or units or the alteration of rights attaching to a share or unit. There are also provisions that aggregate acquisitions within the prior 3 years.
Company Share “Titles”:
These will now be dutiable for conveyancing rate duty as “land use entitlements” from 16 June 2004 on contracts entered into on or after 13 May 2004. Similarly, acquisitions of any rights to occupy through unit holdings in a unit trust will be caught at conveyancing rates.
Tenant’s Fixtures:
Where leased land is transferred, the value of all tenant’s fixtures is now to be included in calculating the unencumbered value of land. This new law reverses the recent Victorian Supreme Court decisions in the Vopak Terminal case (where substantial storage tanks were sold separately to another party) and the Uniqema case (204) (but only on the issue of tenant’s fixtures).
Stamp duty avoidance:
The new laws impose new penalties on professional advisers involved in avoidance, which is widely defined to include either reduction or postponement of stamp duty. Technically, a terms contract could now be considered avoidance!
For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.
