27/11/2008

Landholder duty

“Land rich” stamp duty is an anti-avoidance measure to prevent buyers paying a much lower rate of duty when they acquire control over property by buying shares or units in the company or trust which owns the property. To date “land rich” duty has only applied to the acquisition of a ’significant interest’ of a private company, a private unit trust or wholesale trust, where more than 60 per cent of its property is land.  The duty is to alter from a 'land rich' to a 'landholder' duty effective from 1 July 2009 emulating reform in Western Australia, the Northern Territory, the ACT and Queensland (for trusts only) which jurisdictions have already replaced their “land rich” stamp duties with “landholder” duties.

It is proposed that landholder duty will be imposed on the purchase of a significant parcel of shares or units in any entity that owns land (above a threshold value) as if they were buying a direct interest in the land.  Under the landholder duty the 60 per cent test is eliminated.

Thus if a unit trust holds an amount of land above a threshold then, no matter how much in other non-land assets the unit trust owns, the buyer of a significant parcel of the units will apparently pay duty as if they were buying the land owned by the trust.

Land tax

Effective from the 2009 land tax year a new premium land tax marginal rate of 2 per cent will apply to land tax payers with total taxable land holdings above $2.25 million.  The land holding below the premium threshold will remain subject to the 1.6 per cent rate and receive the 2009 tax free threshold of $368,000.  The premium threshold will be indexed for the 2010 and following tax years.  The premium marginal rate does not apply to exempt land such as principal place of residence or primary production land.

Nominal duties

Nominal duty of either $2 or $10 is payable on a range of documents, for example, duplicates of contracts on which ad valorem duty has been paid, collateral mortgages and transfers of property pursuant to a Will.  Effective from 1 January 2009 these duties will be increased from $2 to $10 and from $10 to $50 as the case may be.  In addition, the duty on the execution of certain trust documents will be increased from $200 to $500 from the same date.

It may be that some of these nominal duty charges will actually move above the cost to the government of processing them.

Deferred abolition

The abolition of marketable securities duty on unquoted marketable securities has been deferred until 1 July 2012.

Mortgage duty has already been abolished on owner occupied housing and investment housing.  The abolition of the remaining mortgage duty has been deferred until 1 July 2012.

The abolition of transfer duty on non-land business assets has been deferred until 1 July 2012.

These initiatives in particular are not proving popular in Canberra as the states were given all of the GST revenue on the understanding that taxes like transfer duty on non-land business assets would be repealed.   This will be a twelve year hiatus.

Parking space levy

From 1 July 2009 the levy will increase from $950 to $2,000 a year per off-street, non residential parking space in the Sydney, North Sydney and Milsons Point business districts and from $470 to $710 a year in the business areas of St Leonards, Chatswood, Parramatta and Bondi Junction.

Existing exemptions will remain in place and the levy will continue to be indexed in line with the Sydney CPI.

If you would like more information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.