Landholder duty

 

The landholder provisions apply to relevant acquisitions in private landholders and public landholders made on or after 1 July 2011. These provisions are contained in Chapter 3 Part 1 of the Duties Act 2001.

What is a landholder?

A landholder is a listed unit trust, an unlisted corporation or a listed corporation that has land‑holdings in Queensland with an unencumbered value of $2,000,000 or more.

A landholder is a private landholder if the landholder is an unlisted corporation.

A landholder is a public landholder if the landholder is a listed unit trust or a listed corporation.

What are the land-holdings of a landholder?

A land-holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor and includes each of the following:

1. anything fixed to the land that may be separately owned from the land
2. rights that relate to, or affect, the use of the land and other land of the corporation or unit trust and enhance the value of the land
3. an interest in land, and anything fixed to the land, that is the subject of a purchase agreement or sale agreement made by the corporation or unit trust (See 'Uncompleted agreements for purchase or sale of land' below).

For the landholder provisions, the land‑holdings of a listed unit trust, unlisted corporation or listed corporation are taken to also include the land-holdings held by a subsidiary of the unit trust or company.

For a listed unit trust, an interest in land of that trust is a land-holding. An interest in land is not a land-holding of a corporation if the corporation holds the land on trust, but only if the corporation is not a beneficiary of the trust. For a subsidiary, an interest in land is not a land-holding of a corporation or listed unit trust if the subsidiary holds the land on trust, but only if the corporation or listed unit trust or any subsidiary is not a beneficiary of the trust.

Uncompleted agreements for purchase or sale of land

For landholder duty, the land-holdings of a corporation or listed unit trust include an interest in land and anything fixed to the land that is the subject of a purchase agreement or sale agreement by the corporation or trust. 

A purchase agreement is an uncompleted agreement, whether or not conditional, for the acquisition of dutiable property including land. A sale agreement means an uncompleted agreement, whether or not conditional, for the disposal of dutiable property including land.

Landholder duty is calculated having regard to the unencumbered value of the land being purchased or sold.

If the sale agreement is later completed or the purchase agreement is not completed, the Commissioner must reassess landholder duty disregarding the land in deciding whether the corporation or listed unit trust is a landholder and in working out the dutiable value of the relevant acquisition.

Reassessment of landholder duty is subject to the Commissioner being satisfied that the purchase agreement or sale agreement was not made, or was not part of an arrangement made, for the purpose of avoiding the imposition of landholder duty.

Value of land-holdings

The unencumbered value of land-holdings is the value determined without regard to:

1. any encumbrance
2. any arrangement between non-arm’s length parties that results in the reduction of the value
   or
3. any arrangement having a significant purpose of reducing the value.

The unencumbered value of land-holdings held on trust must be determined without regard to the liabilities of the trust, including the liability to indemnify the trustee.

Other provisions apply to ensure that the maximum value of the land-holdings is taken into account.

What is a subsidiary?

For the landholder provisions, the land‑holdings of a listed unit trust, unlisted corporation or listed corporation are taken to also include the land-holdings and other property held by a subsidiary of the unit trust or company.

Subsidiary is defined in the Duties Act 2001.

A person has an interest in a landholder if the person has an entitlement as a shareholder or unitholder to a distribution of the landholder’s property on its winding up or termination.

A person who has an interest in a landholder has a significant interest in the landholder if the person has an interest of:

1. in the case of a private landholder—50% or more
   or
2. in the case of a public landholder—90% or more.

Example
A husband and wife each acquire a 30% interest in a private landholder. Together they have made a relevant acquisition that would be liable to landholder duty.

When are interests in an landholder acquired?

A person acquires an interest in a landholder at the following times:

1. if there is an agreement to acquire the interest, the interest is acquired when the agreement is made. However, if the corporation or listed unit trust is not a landholder at that time but is a landholder when the agreement is completed, the interest is acquired when the agreement is completed
2. in other cases, the interest is acquired when it is acquired.

These rules will also apply for agreements entered into prior to 1 July 2011 where the corporation or listed unit trust is not a landholder at the time the agreement is made but is a landholder when the agreement is completed and completion occurs on or after 1 July 2011.

How may an interest be acquired?

A person acquires an interest in a corporation or listed unit trust if the person obtains an interest, or the person’s interest increases, in the corporation or listed unit trust regardless of how it is obtained or increased.

For example, a person may acquire an interest in a corporation or listed unit trust in the following ways:

1. the purchase, gift or issue of a unit or share
2. the cancellation, redemption or surrender of a unit or share
3. the abrogation or alteration of a right for a unit or share
4. the payment of an amount owing for a unit or share
5. if the person holds an interest in the corporation or listed unit trust (whether or not as trustee for another person) and the capacity in which the person holds the interest changes.

Note, for example, the capacity in which a person holds a unit or share in a landholder changes if the person did not hold the unit or share on trust and starts to hold it on trust. 

A person may acquire an interest in a landholder without acquiring units or shares in the landholder.

A liability for landholder duty arises when a relevant acquisition is made.

Landholder duty statements

A person who has made a relevant acquisition must lodge a statement (a Landholder Duty Statement) with the Commissioner within 30 days after the acquisition.

If the relevant acquisition results from an aggregation of the interests of related persons, a person who was a related person of the acquirer must lodge the Landholder Duty Statement unless the acquirer or another related person has lodged the statement.

Reduction of landholder duty

Landholder duty may be reduced where duty is paid or payable under the Duties Act 2001 in the following circumstances:

• corporate trustee duty is paid or payable for land that was also taken into account in calculating landholder duty and both relevant acquisitions were part of one arrangement
• transfer duty is paid or payable on a trust acquisition (other than for a discretionary trust) for land taken into account in calculating landholder duty and both acquisitions were part of one arrangement
• transfer duty is paid or payable for a dutiable transaction involving marketable securities or an equivalent duty in another State and the dutiable transaction is a relevant acquisition
• mortgage duty is paid or payable on a transfer, or agreement for transfer, of shares made by way of security where landholder duty applies to the transaction.

Who is liable to pay the duty?

Duty chargeable under the landholder provisions is payable by the person who makes the relevant acquisition.

If a relevant acquisition results from an aggregation of the interests of related persons, the person who made the relevant acquisition and the related person or persons are jointly and severally liable for payment of the duty.

When must duty be paid?

Following lodgement of the landholder duty statement, the Commissioner will assess the landholder duty and issue a notice of assessment. The duty is payable on the due date stated in the notice of assessment which must be at least 30 days after the issue date.

Private landholders

No excluded interests

A person has an interest in a landholder if the person has an entitlement as a shareholder or unitholder to a distribution of the landholder’s property on its winding up or termination.

A person who has an interest in a landholder has a significant interest in the landholder if the person has an interest of:

1. in the case of a private landholder—50% or more
   or
2. in the case of a public landholder—90% or more.

Example 1
A husband and wife each acquire a 30% interest in a private landholder. Together they have made a relevant acquisition that would be liable to landholder duty.

Excluded interests

If there are one or more excluded interests, duty is chargeable, at the general transfer duty rate on the amount calculated by multiplying the unencumbered value of all land-holdings of the landholder in Queensland (calculated at the date of the relevant acquisition) by the interest in, or the total of the interests in, the landholder constituting the relevant acquisition other than excluded interests.

Example 2
If, in Example 1, the person had acquired 40% of the shares 4 years before acquiring the remaining 20% in an unrelated transaction, the 40% interest would be an excluded interest as it was acquired more than 3 years before the relevant acquisition. 
Landholder duty payable would be calculated on 20% of the unencumbered value of the land-holdings in QLD  (20% x $2,800,000 = $560,000). Duty would be $18,225.

Exempt acquisitions

Duty is not chargeable on the acquisition of an interest in a landholder if the acquisition is an exempt acquisition (see Exceptions and transition).

Public landholders

No excluded interests

Landholder duty for a relevant acquisition in a public landholder is chargeable with duty of 10% of the duty that would be chargeable, at the general transfer duty rate, on a transfer of all the land-holdings of the landholder in Queensland (calculated as if the transfer had occurred at the date of relevant acquisition).

For that purpose, the dutiable value of the land-holdings is the unencumbered value of land‑holdings at the date of the relevant acquisition.

Example 1
A public landholder has QLD land-holdings with an unencumbered value of $10,000,000. A person acquires 95% of the shares on 1 August 2011.
The person has made a relevant acquisition and is required to pay landholder duty. Duty payable on the unencumbered value of all the land-holdings of the landholder in Queensland as at the date of the relevant acquisition is $510,675  (duty on $10,000,000 at the general transfer duty rate). Landholder duty of $51,067.50 is payable (10% of the duty chargeable).

If duty is chargeable in respect of a relevant acquisition made by a person in a public landholder, no duty is chargeable in respect of any further acquisition made by that person in that public landholder because their interest increases.

Excluded interests

If an acquisition includes the acquisition of one or more excluded interests, the duty chargeable is calculated after deducting from the dutiable value of the land-holdings of the public landholder the proportion of that value represented by the value of the excluded interests.

Example 2
If, in Example 1, the person had acquired 40% of the shares before 1 July 2011 (the commencement date of landholder duty) and the remaining 55% of the shares were acquired in an unrelated transaction, the 40% interest would be an excluded interest as it was acquired before the landholder duty commencement date.
Landholder duty payable would be calculated on 55% of the unencumbered value of the land-holdings in Queensland (55% x $10,000,000 = $5,500,000). Duty at the general transfer duty rate would be $274,425. Landholder duty of $27,442.50 is payable (10% of the duty chargeable).

Excluded interests

All interests held or acquired in a corporation or listed unit trust are taken into account for determining whether or not a relevant acquisition has been made. However, excluded interests are disregarded in calculating landholder duty.

The following are excluded interests in private landholders:

1. An interest held by the person or a related person or both of them before the day which is three years before the relevant acquisition. However, the interest is not an excluded interest if the relevant acquisition was made under an arrangement entered into at the time of, or in connection with, the acquisition of the interest.
2. An interest acquired at a time when the landholder did not hold land in Queensland.
3. An interest acquired before 1 July 2011 at a time when the corporation was not a land rich corporation under the previous land rich duty provisions. (More information on this excluded interest is provided below under Transitional provisions.)

The following are excluded interests in public landholders:

1. An interest acquired at a time when the landholder did not hold land in Queensland.
2. Interests acquired before 1 July 2011. (More information on this excluded interest is provided below under Transitional provisions.)

Exempt acquisitions

All interests held or acquired in a corporation or listed unit trust are taken into account for determining whether or not a relevant acquisition has been made. However, landholder duty is not imposed on exempt acquisitions (conditions apply). In addition, an interest acquired under an exempt acquisition (other than where the acquisition is exempt because it the land-holdings of the landholder could have been acquired without incurring transfer duty) is disregarded as an interest in deciding whether a relevant acquisition has been made. 

The following acquisitions are examples of exempt acquisitions:

1. A relevant acquisition for the sole purpose of changing a trustee. 
2. A relevant acquisition solely in the person’s capacity as a liquidator.
3. A relevant acquisition solely because of the making of a compromise or arrangement with creditors approved under the Corporations Act 2001 (Cwlth) Part 5.1 and the Commissioner is satisfied that there is no intention to avoid duty.
4. A relevant acquisition that gives effect to a distribution in the estate of a deceased person.

Example
A person acquires a 30% interest in a private landholder pursuant to the will of a deceased person. That person or a related person purchases another 50% interest in the private landholder. The 50% acquisition results in the acquisition of a significant interest (80%) but the 30% acquisition is an exempt acquisition. Hence, landholder duty is only payable on the 50% acquisition.

Primary production exemption

Transfers of primary production businesses by way of gift from parents or grandparents to their children or grandchildren attract a transfer duty concession under the Duties Act 2001. Transfer duty is not imposed on the dutiable value of the business property transferred to the extent of the gift. Business property means land primarily used to carry on a business of primary production or personal property used to carry on the business on the land.

Where the business is carried on by a corporation, no transfer duty applies in Queensland on a transfer of shares in these cases as transfer duty no longer applies to transfers of marketable securities such as shares.

Where the acquisition of an interest in a corporation or listed unit trust would attract the benefit of this inter-generational transfer duty concession, a landholder duty concession also applies under which the value of the business property is disregarded in working out landholder duty. This is the case even though transfer duty does not apply to the transfer of the shares.  (Marketable security duty has been abolished in Queensland.)

Example
Mr and Mrs A are the sole shareholders in Farming Pty Ltd which carries on a primary production business in Queensland on land worth $5 million. Mr and Mrs A transfer all their shares in the company to their two adult children, C and D by way of gift.  No transfer duty is payable on the transfer of shares as marketable security duty has been abolished in Queensland. 
C and D have made a relevant acquisition in a landholder. However, the value of the business property of the corporation must be disregarded in working out landholder duty so that no duty will be payable.

Transitional provisions

Private landholders

Landholder duty is chargeable on any relevant acquisition in a private landholder made as a consequence of a person acquiring an interest in the private landholder on or after 1 July 2011.

If a person acquires an interest in a private landholder on or after 1 July 2011, acquisitions made before 1 July 2011 are counted for determining whether the person has made a relevant acquisition in the private landholder. However, interests acquired before 1 July 2011 at a time when the corporation was not a land rich corporation within the meaning of Chapter 3 Part 1 of the Duties Act 2001 as in force at 30 June 2011 are excluded interests and are not counted for working out the landholder duty payable.

Example

Unlisted corporation

Pre 1 July 2011	Post 1 July 2011	Liability
30% not land rich	40% landholder	40%
30% land rich	40% landholder	70%

Even if the pre-1 July 2011 interests are not excluded interests on this basis, they may be excluded interests on another basis, namely, they were acquired more than three years before the relevant acquisition.

Public landholders

Landholder duty is chargeable on any relevant acquisition in a public landholder made as a consequence of a person acquiring an interest in the public landholder on or after 1 July 2011.

If a person acquires an interest in a public landholder on or after 1 July 2011, acquisitions made before 1 July 2011 are to be counted for the purpose of determining whether the person has made a relevant acquisition in the public landholder. However, acquisitions made in public landholders before 1 July 2011 are excluded interests for duty purposes and are not counted for working out the landholder duty payable.

See the section on When are interests in a landholder acquired. 

Example
A person acquires 30% in a public landholder before 1 July 2011 and 70% on or after 1 July 2011. The person has made a relevant acquisition of 100% in the landholder.  For working out landholder duty, the 30% acquisition is an excluded interest. Landholder duty is therefore payable on 70% of the land in Queensland as at the date of the latest acquisition. The actual duty payable would be 10% of that amount.