VIC Land Tax Snares Companies

Anyone planning to invest in a company or unit trust hat holds land in Victoria will need to be vigilant to determine whether the entity they are investing in is “land rich” under the new land holder duty rules.

More companies and Unit Trusts that hold land in Victoria will be classified as Land Rich, which means more share and unit transfers will become subject to Stamp Duty.  Under the model released in the State Budget, the State Government is expected to start to charge stamp duty on all significant Share and Unit transfers where the entity is considered land rich from the 1st of July next year.

Under current laws a land rich entity is one that owns property which has a value of $1 million or more, and that its land holdings must comprise more than 60% of the value of all of its property ( both land and other property).  Under the proposed landholder duty model the 60% test will be be removed and an entity in Victoria will be considered land rich if it simply owns property above a certain value, this value is yet to be announced, in NSW it is set at $2 Million.  If a company is determined to be land rich then the acquisition of shares in the entity above a certain percentage will attract Stamp Duty.

The Victorian Government is expecting to raise an extra $50 to $75 million dollars per year from these changes.

If people are concerned that this will cause problems in their entities they should contact Paul or Michelle to discuss the issues.