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Australia: Victoria state government proposes tax legislation

Australia: Victoria government proposes tax legislation

The government of Victoria (the state where Melbourne is located) released draft legislation following this week’s introduction of the 2019-2020 budget.

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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.

Excise tax (duty) on acquisition of fixtures

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.

Changes to corporate reconstruction exemption

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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