31 May 2019

Victorian Budget 2019: significant changes to the stamp duty regime

This article was written by Leah Ranie, Ari Rosenbaum and Jordonne Colley.

The Victorian Budget was handed down on Monday 27 May 2019.  On Tuesday 28 May 2019, the State Taxation Acts Amendment Bill 2019 (Vic) (Bill) was introduced into Parliament.  If passed, the Bill will make significant changes to the Duties Act 2000 (Vic) (Duties Act) by, among other things, updating corporate reconstruction relief for intragroup transfers, extending the circumstances in which an “economic entitlement” will be dutiable, recognising certain interests in fixtures as dutiable property and increasing foreign purchaser duty and absentee land tax surcharges.

Corporate reconstruction relief: broader application but no longer a 100% exemption

Under the current law, certain transactions between members of a 90% owned and controlled group may be 100% exempt from duty under the corporate reconstruction exemption provisions.   

However, under the changes proposed by the Bill, the exemption will be changed to a 90% concession from duty (other than in limited circumstances involving multiple eligible transactions relating to an earlier eligible transaction). 

On the other hand, in good news for taxpayers, the changes proposed under the Bill expand the concession to apply to dutiable grants and transfers of leases and to remove the requirement that the members of the group involved in the exempted transaction remain members of that group for at least 3 years following the transaction.  There will also no longer be any ongoing obligations imposed on a corporate group following an eligible transaction. 

The above changes are proposed to apply from 1 July 2019 but will not apply to arrangements entered into before this date.

Acquisition of an “economic entitlement” will be an acquisition of land

Under the current law, a liability to landholder duty will arise if a person acquires an “economic entitlement” in a private landholder.

In BPG Caulfield Village Pty Ltd v Commissioner of State Revenue [2016] VSC 172 (BPG), the Supreme Court of Victoria decided that:

  • an entity does not acquire an economic entitlement where it acquires the right to participate in the proceeds of sale of some but not all of the Victorian land held by a Victorian private landholder; and
  • where an entity acquires an economic entitlement, landholder duty will not be chargeable unless the economic entitlement amounts to an interest of 50% or more of the value of all the Victorian landholdings of the Victorian private landholder.

Our previous alert in relation to BPG is available here.

It is proposed that the Duties Act be amended to address the BPG decision by focussing on the economic entitlement with respect to relevant land rather than the land holdings of the landholding entity.  In this context, relevant land includes interests in fee-simple estates and leases and interests in fixtures.

Under the Bill, an economic entitlement will be acquired where an arrangement is made in relation to relevant land that has an unencumbered value of more than $1 million and that arrangement entitles a person to participate in (or acquire the entitlement to) the income, rent or profits from, capital growth of, or the proceeds of sale of, the relevant land or to receive any amount determined by reference to the above.  The person acquiring the economic entitlement need not be a party to that arrangement and the economic entitlement may be acquired by any means, including on the creation or transfer of that entitlement.

The changes proposed by the Bill will deem a person who acquires an economic entitlement to have acquired beneficial ownership of the relevant land equal to:

  • the percentage of the economic entitlement that the person is entitled to receive; or
  • 100% of the value of the land if the arrangement does not specify the percentage of the economic entitlement acquired or if, in addition to specifying the percentage, the person is entitled to any other amounts.

Under the Bill, an economic entitlement may still be acquired in a landholder (and, if so, will still be subject to duty) if it entitles the person to participate in the dividends or income of the landholder.

The above changes are proposed to apply from the day after the Bill receives Royal Assent but will not apply to arrangements entered into before this date.

An interest in a fixture will be a separate item of dutiable property

The Bill extends the definition of “dutiable property” in the Duties Act to include interests in fixtures that are created, dealt with or held separately from estates or interests in the land on which the fixtures are located. 

The proposed definition of “fixture” includes anything that constitutes a fixture at law or any other items fixed to land, including tenants’ fixtures. 

The Bill targets fixtures with significant value and should only affect those that have an unencumbered market value of at least $2 million.  Phasing-in provisions apply a concession to fixtures between $2 million and $3 million where the closer the relevant value is to $2 million, the closer the chargeable duty is to nil and the closer the relevant value is to $3 million, the closer the duty is to the full amount that would otherwise apply.  Full duty is payable only in relation to fixtures valued at more than $3 million.  However, it is important to note that this valuation considers the unencumbered value of the fixtures to which the dutiable property relates taken as a whole, not the unencumbered value of the interest in the fixtures subject to the dutiable transaction.

The above changes are proposed to apply from the day after the Bill receives Royal Assent but will not apply to arrangements entered into before this date.

Increased surcharges for foreign purchasers and absentee land tax

The surcharges applicable in relation to absentee land tax and the foreign purchaser duty surcharge are also proposed to increase under the Bill from 1.5% to 2% and from 7% to 8% respectively.

The changes to the foreign purchaser duty surcharge are proposed to apply from 1 July 2019 but will not apply to arrangements entered into before this date.  Changes to the absentee owner surcharge are proposed to take effect from the day after Royal Assent and apply from 2020.

Further amendments

The Bill also introduces a range of other amendments, including increasing the motor vehicle duty rate for certain vehicles, providing concessions and exemptions for “green cars” and demonstrator vehicles, providing a concession for transfers of commercial and industrial properties in regional Victoria and allowing unit trust schemes that were at any time eligible for registration as wholesale unit trust schemes to be public unit trust schemes.


The changes proposed under the Bill will result in an increased burden for taxpayers by expanding the duty base and potentially requiring valuations for intragroup transactions. However, a range of intragroup transactions may now be eligible for a concession as a result of the removal of the corporate reconstruction relief post association requirements. Taxpayers should consider the impact and timing of the changes proposed by the Bill, especially in respect of transactions that are currently being negotiated.

For more information on the application of these amendments to your business or your transactions, please contact Leah Ranie, Ari Rosenbaum or your usual KWM Tax contact.

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