The government of Victoria (the state where Melbourne is located) released draft legislation following this week’s introduction of the 2019-2020 budget.
The draft bill, State Taxation Acts Amendment Bill 2019 (Vic), proposes changes that would impose excise tax (duty) on the acquisition of fixtures located in Victoria; that would change the corporate reconstruction exemption and expand the “economic entitlement” rules; and that would increase to the foreign purchaser additional duty (FPAD) for duty and absentee owner surcharge for land tax.
The draft bill seeks to address a unique situation in Victoria when the transfer or a landholder acquisition involving fixtures or items that are physically fixed to leases is generally not subject to tax. As proposed, effective 1 July 2019, these items would be included as “dutiable property,” and the related transactions would be subject to tax if value exceeds $2 million.* These rules would apply regardless of whether the fixture-related transaction could be entered into independently of the underlying land. There would be transitional rules with a concession for calculating tax on these items with a value of less than $3 million. These amendments would affect a broad range of transactions—in particular property, mining, agriculture, and infrastructure-related transactions.
The draft bill proposes various amendments to the corporate reconstruction and consolidation exemptions in the Duties Act 2000 (Vic) (Duties Act), effective from 1 July 2019.
Currently, certain corporate restructures and consolidations are fully exempt from tax (duty). Under the proposal, effective 1 July 2019, the tax relief would be provided by way of a 90% concession with 10% of the tax becoming payable. This would mean that value would be become increasingly important. With the move away from a full exemption to a 90% concession, the tax authority could fully exempt subsequent restructure steps involving the same asset if occurring within 30 days of the earlier corporate reconstruction or consolidation transaction.
Read a May 2019 report prepared by the KPMG member firm in Australia
*$ = Australian dollar
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