Michelle Bennett, Tessa Livingston & Sara Wemyss-Smith discuss draft legislation on proposed tax measures following the release of the 2019-2020 Victorian Budget.
Following the release of the 2019-2020 Budget on Monday 27 May 2019, the Victorian Government has released draft legislation, State Taxation Acts Amendment Bill 2019 (Vic) (Bill). Our article on the 2019-2020 Budget can be found here.
The draft legislation proposes significant changes including imposing duty on the acquisition of fixtures located in Victoria, changes to the corporate reconstruction exemption and expanding the “economic entitlement” rules, as well as increases to the Foreign Purchaser Additional Duty (FPAD) for duty and Absentee Owner Surcharge for land tax (AOS).
Key proposed amendments are discussed further below.
Duty chargeable on acquisition of fixtures
The Bill seeks to address a unique situation in Victoria where the transfer of or a landholder acquisition involving fixtures or items that are physically fixed to leases are generally not subject to duty. From 1 July 2019, these items will be included as “dutiable property” and their dealings will be subject to duty if they are valued over $2 million. This is regardless of whether or not they may be transacted independently of the underlying land. There are transitional rules with a concession for calculating duty on these items with a value of less than $3 million.
These amendments will affect a large range of transactions, in particular property, mining, agriculture and infrastructure transactions.
Changes to the corporate reconstruction exemption
The Bill proposes various amendments to the corporate reconstruction and consolidation exemptions in the Duties Act 2000 (Vic) (Duties Act) with effect from 1 July 2019.
Currently, certain corporate restructures and consolidations are fully exempted from duty. From 1 July 2019, the duty relief will be provided by way of a 90 percent concession with 10 percent of the duty becoming payable. This means the question of value will become increasingly more important. Given the move away from the full exemption to a 90 percent concession, the Commissioner may fully exempt subsequent restructure steps involving the same asset if it occurs within 30 days of the earlier corporate reconstruction or consolidation transaction.
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