Landholder duty
What is landholder duty?
A liability for landholder Duty arises when a person or entity makes a relevant acquisition in a landholder.
Landholder duty is an equivalent tax to conveyance duty. Conveyance duty applies to the direct transfer of property ownership from one person or entity to another. Landholder duty is intended to tax indirect property transfers, such as, share transfers in a company that owns land in the ACT.
Changes for 2024-25
From 1 July 2024, several new landholder duty provisions were introduced into the Duties Act 1999.
A new taxing provision applies that combines relevant acquisitions occurring within 12 months, in different landholders, where it has been used to gain effective ownership of a singular or set of landholdings. Duty is imposed on the sum of the combined dutiable amount of each relevant acquisition in each landholder, calculated against the unencumbered value of each landholding on the day of the later relevant acquisition.
See also update to Revenue Circular, LHD002.2 Calculation of Landholder Duty for further details on how landholder duty is calculated. A new definition of ‘land’ is introduced, which is expansive and includes anything attached to the land or a permanent structure on the land irrespective of ownership of the attached ‘thing’.
When a person acquires an interest in a landholder under an agreement to purchase, has been updated. The provisions introduce a series of events, with the earliest event that occurs being deemed the acquisition date of an interest, or at the end of 12 months from the execution of the agreement, which ever is first.
New provisions apply for uncompleted agreements to purchase shares or units in a landholder.
Exemptions are based on actual Chapter 3 transactions, rather than a hypothetical transaction under the Chapter 2 provisions.
A stricter exemption was introduced for acquisitions to secure finance replacing the financial accommodation concession.
Who is a landholder?
A landholder is an entity that has a landholding in the ACT. An entity may be a private company or a private unit trust scheme.
A landholder will include the entity who owns the legal title of the land. A landholder will also include an entity that constructively owns land through another entity (linked body, see below). The linked body may themselves be the legal title holder of the land or they may be linked to another body that owns land legally or beneficially.
A landholder will also include an entity that is a beneficiary (actual or potential) of a landowning discretionary trust.
What is a landholding?
A landholding is any interest in land in the ACT, other than the interest of a mortgagee, charge or other secured creditor or a profit à prendre.
‘Land’ is defined to include anything attached to the land, whether it is a fixture under law; or owned separately from the land; or separate from the land under a law in force in the ACT. The definition is expansive and deems that a thing is attached to the land if it directly attached to the land itself or attached to a permanent structure on the land.
- For example, a telecommunication tower may ordinarily be considered a good or chattel. However, telecommunication towers are often attached to the top of a building which is a permanent structure on the site. As a result, the telecommunication tower will be ‘land’ for the landholder duty provisions.
There are specific exclusions from the definition of land, such as:
- construction equipment temporarily on the land,
- a thing that is both not a fixture under law and is used in primary production, or
- a relocatable home attached to either a residential park or mobile home park.
When does a liability occur?
A liability for landholder duty arises when a relevant acquisition is made. If the acquisition arises from an agreement to purchase, allot, or issue a unit or share, the acquisition is made, for this part, when the agreement is completed. This occurs when a person or entity acquires an interest in a landholder that is:
- a significant interest; or
- when aggregated with associated persons, amounts to a significant interest; or
- when persons or entities acquiring interest in a landholder and are acting in concert, or the acquisitions are essentially one transaction, and when these acquisitions are aggregated, they amount to a significant interest; or
- a further interest beyond a significant interest; or
- a relevant acquisition made in one or more landholders by a person or associated person, within 12 months that gives evidence of an arrangement to obtain effective ownership over a landholding.
What is a significant interest?
A significant interest is when a person or entity is entitled to at least 50 per cent of the distribution of property from the landholder on the winding up of the landholder or otherwise.
Linked bodies
To determine whether a private company or private unit trust is a landholder (and the amount of duty payable on a relevant acquisition), you must consider any land directly held by the company or on behalf of the unit trust. You also must consider if the private company or private unit trust indirectly owns land held by linked bodies.
A body includes an entity (private company or private unit trust); a partnership or a trust. However, it does not include a discretionary trust; an individual; a listed company or a public unit trust scheme.
A landholder has an interest in land held by a linked body if they would be entitled to a distribution of any of the linked property of the linked body and either:
- any linked body would be entitled to receive at least 50 per cent of the unencumbered value of all the property held by any other linked body; or
- the entity would be entitled to receive at least 50 per cent of the aggregated unencumbered value of all the property held by each linked body were aggregated.
In summary, a landholder is taken to constructively own the landholdings of any other linked body even if only one linked body would be entitled to receive 50 per cent of the property of any linked body.
For example, if the landholder Company A owned 25 per cent of the shares in Company B, therefore they are entitled to a distribution of property. However, they still need to meet the 50 per cent test. If Company B owned 50 per cent of the unitholding in the landholder Teal Unit Trust, then the test would be met. Company A would be deemed to constructively own 12.5 per cent (proportional to their entitlement) of the landholdings of the Teal Unit Trust on the date of the relevant acquisition.
What is Unencumbered Land Value?
The unencumbered value of land is different to the average unimproved value (which is the land value used for assessing rates).
Landholder duty is assessed on the unencumbered value of the property, which includes the land and fixtures (house), without reference to any restrictions or debts that lower the property’s value (mortgage, easements or covenants etc).
What is an Associated Person?
A person is associated with another person in the following cases:
- People are associated if they are related people
- Individuals are associated people if they are partners in a partnership to which the Partnership Act 1963 applies
- Private companies are associated people if common shareholders have a significant interest in each private company or minority shareholders in common that would have a majority interest if their interests were aggregated
- Trustees are associated people if any person is a beneficiary common to the trusts of which they are trustees
- A private company and a trustee are associated people if a related body corporate of the company is a beneficiary of the trust of which the trustee is a trustee
- A public company and a subsidiary public company
- Responsible entities of separate managed investment schemes are associated if there is a member common to both managed investment schemes, and who is beneficially entitled to more than 20% of the property
- Associated persons of another person are also associated people. For example:
- Person A is an associated person of Person B.
- Person A is also an associated person with Person C.
- As a result of this definition, Person B is an associated person with Person C, by reference to Person A being a joint associated person.
Who is a Related Person?
A person is related to another person in the following cases:
- Individuals are related if:
- They are partners, or they have been partners and the partnership has ended (whether the partnership ended in Australia or elsewhere), or
- The relationship between them is that of parent and child, brothers, sisters, or brother and sister
- Private companies are related people if they are related bodies corporate
- An individual and a private company are related people if the individual is a majority shareholder or director of the company or of another private company that is a related body corporate of the company
- An individual and a trustee are related people if the individual is a beneficiary of the trust of which the trustee is a trustee
- A private company and a trustee are related people if the company, or a majority shareholder or director of the company, is a beneficiary of the trust of which the trustee is a trustee.
What am I required to do?
Acquisition Statement
A person or entity who makes a relevant acquisition must lodge an acquisition statement no later than 90 days after the date of the relevant acquisition. A tax default occurs if Landholder Duty is not paid within 90 days of the relevant acquisition.
A person does not need to prepare an acquisition statement in relation to a relevant acquisition made by the person if the rate of duty is nil.
How is my Duty Calculated?
Duty is payable at the determined rate on the amount calculated by multiplying the unencumbered value of all landholdings of the landholder in the ACT as at the date of the relevant acquisition, by the proportion of the value represented by the interest acquired in the relevant acquisition.
Further information can be found on the Calculation of Landholder Duty revenue circular.
Value of Acquisition | Duty Payable |
|---|---|
| Up to $2,000,000 | Nil |
| More than $2,000,000 | A flat rate of $5.00 per $100 applied to the total transaction value |
Value of Acquisition | Duty Payable |
|---|---|
| Up to $1,900,000 | Nil |
| More than $1,900,000 | A flat rate of $5.00 per $100 applied to the total transaction value |
Value of Acquisition | Duty Payable |
|---|---|
| Up to $1,800,000 | Nil |
| More than $1,800,000 | A flat rate of $5.00 per $100 applied to the total transaction value |
Value of Acquisition | Duty Payable |
|---|---|
| Up to $1,700,000 | Nil |
| More than $1,700,000 | A flat rate of $5.00 per $100 applied to the total transaction value |
Value of Acquisition | Duty Payable |
|---|---|
| less than or equal to $1,600,000 | nil |
| More than $1,600,000 | A flat rate of $5.00 per $100 applied to the total acquisition value |
Value of Acquisition | Duty Payable |
|---|---|
| less than or equal to $1,500,000 | nil |
| More than $1,500,000 | A flat rate of $5.00 per $100 applied to the total acquisition value |
Value of Acquisition | Duty Payable |
|---|---|
| up to $200,000 | $20 or $0.70 per $100 or part thereof, whichever is greater |
| $200,001 to $300,000 | $1,400 plus $1.20 per $100 or part thereof by which the value exceeds $200,000 |
| $300,001 to $500,000 | $2,600 plus $1.90 per $100 or part thereof by which the value exceeds $300,000 |
| $500,001 to $750,000 | $6,400 plus $2.39 per $100 or part thereof by which the value exceeds $500,000 |
| $750,001 to $1,000,000 | $12,375 plus $3.15 per $100 or part thereof by which the value exceeds $750,000 |
| $1,000,001 to $1,499,999 | $20,250 plus $3.40 per $100 or part thereof by which the value exceeds $1,000,000 |
| $1,500,000 and over | A flat rate of $5.00 per $100 applied to the total acquisition value |
Who is Liable to Pay?
The person who makes the relevant acquisition is required to pay duty. If the relevant acquisition results from an aggregation of interests of associated people, the person who made the relevant acquisition and the associated person or people are jointly and severally liable for payment of duty.
Am I Exempt?
In some circumstances, you may be eligible for an exemption from landholder duty, such as:
- When you are a beneficiary of a deceased estate, or
- The transfer is between a married couple or de facto couple pursuant to an order of a court, or under a financial agreement consequent on the end of a marriage, de facto or domestic relationship, or
- You are an eligible pensioner with a disability or a special disability trust acquiring a land use entitlement by an allotment of shares or an issue of units in land used for supportive housing to be used as a principal place of residence.
Further details of exemptions can be found in Chapter 3, Parts 3.4 and 3.7 and Chapter 11 of the Duties Act 1999 (ACT).
Deceased Estates
If you have received property from a deceased estate ‘in conformity’ with the trusts contained in the will or arising on intestacy.
Beneficiary of the will
"In conformity" means you’re entitled to the property as the beneficiary (inheriting money or other property) either
- under the terms of the will or
- if the person died without leaving a valid will, under the rules of intestacy.
If a will is contested, the duty chargeable will be determined based on any court orders made. This is because a court order acts as an addition (codicil) to the will, any transfer made under the orders is considered to be a transfer in accordance with the terms of the will of the person who has died.
Transfers not in conformity to the will
The beneficiaries of a will often decide to vary their entitlements.
For instance, one beneficiary may decide to gift or sell part of a property they inherit to another beneficiary. When this happens, the normal rate of transfer duty applies to any part of the property received that varies the terms of the will.
If you vary the entitlements under a will this way, you must provide a valuation report as evidence of the value of the property. This is for the purposes of assessing the liable duty.
Here is an example of how transfer duty applies when you vary the terms of the will.
Example
Under the terms of the will, equal shares in the family company are left to John and Lisa by their parent.
- The land held by the company is valued at $4,000,000.
- John agrees to pay $2,000,000 to Lisa in exchange for Lisa’s half shares in the company.
- The 50 per cent of the shares John was entitled to under the will attract no duty.
- However, the 50 per cent John bought from Lisa attracts landholder duty. John will need to lodge a relevant acquisition statement and pay landholder duty within 90 days of acquiring the interest.