DA164.1.1—Land rich duty—related persons—section 164(2) of the Duties Act 2001

1. This Public Ruling outlines certain circumstances in which persons, generally, will not be considered to be related under s.164(2) of the Duties Act 2001 (the Duties Act) for the purposes of Chapter 3 Part 1 of the Duties Act (the land rich provisions).
2. The land rich duty provisions only apply to unlisted corporations¹. These are corporations whose shares are not quoted on the market operated by a recognised stock exchange.
3. Section 157 of the Duties Act imposes land rich duty on the dutiable value of a relevant acquisition².
4. A person makes a relevant acquisition if—
   1. the person acquires a majority interest³  in a land rich corporation
      
      or
      
   2. the person or related person acquires an interest in a corporation and, when aggregated with certain acquisitions, a majority interest results⁵
      
      or
      
      
   3. having acquired a majority interest, the person’s interest in the corporation increases⁶.
5. A person acquires an interest in a corporation if the person obtains an interest, or increases the person’s interest, in the corporation regardless of how it is obtained or increased. A person may acquire an interest in a corporation in a number of ways, including through an issue or transfer of shares.⁷
6. Section 164 of the Duties Act lists the persons who are related persons for the purposes of the land rich provisions.
7. Section 164(2) of the Duties Act states that a person is a related person of another person if the persons acquire interests in a corporation and the acquisitions form, evidence, give effect to or arise from what is substantially one arrangement.

Subscribers acquiring shares under a public float

8. While each transaction will be considered on its individual merits, the acquisitions of shares in a public float by persons who are not ‘related’ for the purposes of s.164(1) of the Duties Act, would, generally, not be considered to be acquisitions by related persons for the purposes of s.164(2).
9. Section 164(2) of the Duties Act refers to ‘persons’, which encompasses a wide range of relationships including, but not limited to:
   1. partners in a partnership
   2. persons who, although not related under s.164(1) of the Duties Act at the time of the acquisition or acquisitions, become related within the meaning of that section soon after they acquire their respective shareholdings
10. The Commissioner may require details of acquisitions under a public float to determine whether or not a majority acquisition by 'related persons' has occurred.

Transfers of shareholdings by listed corporations

11.  The situation may arise in which:
    1. a listed corporation holds a majority interest in an unlisted corporation that is a land rich corporation as defined in s.165 of the Duties Act
       
       and
       
    2. the listed corporation transfers its interest in the land rich corporation to the shareholders of the listed corporation.

ABC Co Ltd (ABC) is a listed corporation of which XYZ Co Pty Ltd (XYZ) is a wholly owned subsidiary. XYZ is a land rich corporation. ABC transfers all shares in XYZ to the shareholders of ABC.

12. While each transaction will be considered on its individual merits, the Commissioner would, generally, consider that the acquisitions of shares by persons in the circumstances outlined in paragraph 11, where those persons are not ‘related’ for the purposes of s.164(1) of the Duties Act, are not acquisitions by ‘related persons’ for the purposes of s.164(2).
13. The Commissioner may require details relating to the acquisition of the shares to determine whether or not a majority acquisition by ‘related persons’ has occurred.

14. This Public Ruling takes effect from the date of issue. 

 

David Smith
Commissioner of State Revenue
Date of Issue: 3 July 2009

Public Ruling	Issued	Dates of effect
		From	To
DA164.1.1	3 July 2009	3 July 2009	Current