If you are a person looking to acquire shares or units in a company which owns land then you need to be aware that you may be liable for Landholder Duty.
What is Landholder Duty?
Landholder Duty is a duty that can be incurred when a person acquires shares or units in a company or unit trust which owns land (“Landholder”). A company or unit trust is deemed a ‘landholder’ if it has land ( ‘landholdings’) in NSW with a total unencumbered value of $2 million or more.
A landholding refers to an interest in the land such as ownership and also includes an interest in anything fixed to the land, notwithstanding that the item may be a fixture too. For the purpose of landholder duty, an interest in land does not include: an estate or interest of a mortgagee, charge or other secured creditor.
Who pays it and under what conditions does the obligation to pay arise?
Anyone acquiring shares or units in a Landholder may be liable for Landholder Duty. The liability arises when the acquisition is deemed to be a “relevant acquisition”.
The term “relevant acquisition” refers to the situation where a person:
- Acquires an interest in a landholder that would be deemed to be a “significant interest”; or
- Acquires an interest in a landholder, that when aggregate with other interest already held by that person or associated persons in the landholder would now amount to being a “significant interest”; or
- Already holding a “significant interest” in a landholder then proceeds to acquire a further interest; or
- When multiple persons acquire interests in a landholder which is essentially one arrangement, that aggregate to form a “significant interest” in the landholder.
A “significant interest” in a landholder occurs, if the person, in the event of distribution would be entitled to:
- 50% or more of the property distributed if the landholder is a private company or private unit trust scheme (a ‘private landholder’).
- 90% or more of the property distributed if the landholder is a listed company or public unit trust scheme (a ‘public landholder’).
The Duties Act 1997 (NSW) states that a person can acquire an interest in a landholder in several ways including:
- Purchase, gift or issue of a unit or share in a landholder;
- Through surrender, cancellation or redemption of a unit or share in a landholder;
- The capacity in which you hold you interest changes;
- Alteration or revocation of a right for a unit or share in a landholder
Persons are reminded that acquisition of a “significant interest” does not need to occur in one event. For example, if you currently hold a 35% interest in a landholder then acquire another 15% interest, you may be liable for landholder duty.
When do they have to pay it?
Persons liable for landholder duty must pay within three (3) months of the acquisition. Failure to pay duty on time may result in penalty interest being imposed. Penalty tax may also be imposed in circumstances.
How is it calculated?
Landholder duty is calculated at the same rate as transfer duty and calculated on the unencumbered value of the landholdings and goods of the landholder. Please note that certain goods are excluded from the calculation.
In addition to landholder duty, if you are a foreign person who has made a ‘relevant acquisition’ in a landholder then you may also be liable to pay Surcharge Duty.
Landholder duty can be very complex and is certainly something you should not overlook.
If you require assistance with considering Landholder duty implication, then Longton Legal’s property and commercial team are ready to assist you.
Chapter 4, Duties Act 1997 (NSW)
*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*
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