The Revenue Laws Amendment Bill 2018 came into operation on 12 June 2019 as the Revenue Laws Amendment Act 2019 (WA) (Amending Act). The Amending Act has altered aspects of the Duties Act 2008 (WA), Land Tax Assessment Act 2002 (WA) and Pay-Roll Tax Assessment Act 2002 (WA). Some of the amendments are substantial and will have a significant impact on the way that transactions are structured, particularly property transactions.
The Amending Act also enshrined into legislation some of the common practices of the Commissioner of State Revenue, which have, as determined by the State Administrative Tribunal (SAT), been applied erroneously and contrary to the relevant statute as discussed further in this article.
Sections 45 - 48 of the Amending Act provide certainty as to how particular duty concessions are to apply. These are generally consistent with the Commissioner’s historical implementation of key duty concessions.
In April 2019, we reported on the case of Crugnale and the Commissioner of State Revenue [2019] WASAT 8. In this case the SAT held that the conversion of a fee simple lot (which resulted from the termination of a strata scheme) to the new lots in a survey-strata scheme were a dutiable transactions. The SAT also said that the termination of that original strata scheme to the fee simple lot was also a dutiable transaction, but because the Commissioner had not assessed it as such, this aspect of the transaction was not included in the appeal being considered by the SAT.
This case made it clear that the practices of the Commissioner, notwithstanding many of those practices are set out in the forms and information provided by the Office of State Revenue, do not override the provisions of the relevant legislation. See our article on this case at here for further details.
The Duties Act 2008 (WA), as at 13 June 2019, provides for nominal duty if land is transferred:
If applicable, nominal duty will also be charged on the subsequent transfer of the land (albeit subdivided) back to the original transferor/s. This must occur within five years of the subdivision (longer periods many be approved by the Commissioner).
The Commissioner will reassess the initial transfer at the relevant duty rate, if the subsequent transfers of the subdivided lots:
If the third bullet point applies, the value of the change in the relevant proportions will be assessed for duty, not the value of the entire property.
This ‘subdivision concession’ does not apply to multi-level strata developments.
Concessional duty will apply to bare trust arrangements, but not initially.
The difference with these arrangements for concession duty and the subdivision concessional duty provisions, is that on the initial transfer to the bare trustee ad valorem duty is payable.
When the transfer of the relevant property is made to the beneficiary (being the original transferor), as long as the Commissioner is satisfied that no other person held a beneficial interest in the property between the original transfer to the bare trustee and subsequent transfer to the beneficiary, nominal duty will be applied.
Nominal duty will be applied to:
The bare trustee will need to apply for a refund of the ‘full’ duty paid on the original transfer, less the nominal duty.
If the Commissioner determines that another person has held a beneficial interest, then the subsequent transfer will be assessed for duty at the relevant rate and there will be no ability to claim a refund for the full rate of duty paid on the original transfer to the bare trustee.
Additionally, the transfer to the beneficiary must be lodged for registration within 60 days of the assessment for nominal duty. If this does not occur, a reassessment for duty purposes must be undertaken and the Commissioner must then still be satisfied that no other person has held a beneficial interest in the property for nominal duty to continue to apply.
In our article of February 2019, we foreshadowed significant changes to landholder duty (see article here).
Prior to the Amending Act, landholder duty applied to acquisitions of companies or unit trusts that held, or were entitled to hold, land in Western Australia (WA) with a value of $2 million or more (Landholder). Duty was assessed on the value of land and chattels (within WA) held, or entitled to be held, by the Landholder and any related entities, in proportion to the interest being acquired.
The recent amendments limit the ability for taxpayers structure transactions to avoid or reduce landholder duty. The amendments also broaden who is considered a ‘linked party’ of a landholder. In effect, the Commissioner can now look further into, and trace, the beneficial ownership of property. The legislation now refers to ‘direct and indirect interests’ as being linked for landholder duty purposes.
Additionally, the following transactions will now be considered ‘one transaction’ and duty will be aggregated:
An acquisition in a Landholder entity and another entity that only holds chattels
An acquisition of two or more entities which independently do not hold land and chattels valued at $2 million or more, but together they do
Transfer of chattels which is, or is essentially, part of the acquisition of a Landholder entity
Two or more entities are acquired and together those entities have a direct or indirect interest of 50% or more in a landholding entity (the 50% threshold applies to both listed and unlisted entities (previously the threshold was 90%))
The Amending Act aims to close off various ‘loopholes’ and areas where the Government considers there has been ‘leakage’ of duty. Importantly, many of the Commissioner’s long-standing practices which did not have legislative authority, now do.
The Amending Act also addresses the application of other aspects of duty and tax, which are not addressed in the article. This includes family arrangements, partnerships and land tax on primary places of residence. Please contact us to discuss how these changes may affect you.
