Often a decision is taken to purchase properties from the joint
venture that has developed the property.
Whilst this may mean that income tax, GST and stamp duty will be
payable, the benefits of the transfer will generally include asset
protection, 100% percent ownership and the ability to perhaps
recognise the eventual sale on capital account.
Each decision to retain or acquire product needs to be determined
on the relevant facts of each situation.
The sale of the property will give rise to a number of taxation
implications, two (2) of which are income tax and stamp duty.
For income tax purposes, these acquisitions need to be done at
market value. This is often based on the retail price or
alternatively obtaining a independent valuation in respect of the
property being acquired. On the basis that no commission or
marketing costs will be incurred on these particular Lots, it would
be commercial to discount the price accordingly.
For duty purposes the transfer will be assessed based on market
value and duty applied according to the progressive rates
below:
|
Dutiable Value Range |
Rate |
|
$0 -$25, 000 |
1.4 per cent of the dutiable value of the property |
|
> $25, 000 - $130, 000 |
$350 plus 2.4 per cent of the dutiable value in excess of $25, 000 |
|
> $130, 000 -$960, 000 |
$2, 870 plus 6 per cent of the dutiable value in excess of $130, 000 |
|
More than $960, 000 |
5.5 per cent of the dutiable value |
Normally duty is assessed on the value of each property
transferred, not the aggregate value of all the properties where
more than 1 property is transferred.
However, the State Revenue Office (SRO) are
undertaking numerous audits of transactions over the past 4 years
that seek to increase the amount of duty payable by the
purchaser.
The main areas that the SRO are looking at are:
- The potential aggregation of multiple properties purchased from
a single development in an entity; and
- The difference between the actual price paid for a property and the unencumbered value of the property
Aggregation of Properties
Under the Duties Act 2000, the SRO has the ability to
aggregate dutiable transactions. The Act states that dutiable
transactions relating to separate items of "dutiable
property" are to be aggregated and treated as a single
dutiable transaction if the dutiable transactions occur within 12
months of each other, and the transactions together evidence that
substantially there is one arrangement relating to all of the items
or parts of the dutiable property.
These provisions are anti avoidance provisions where persons
acquire property in parts to reduce the stamp duty, as stamp duty
is assessed on a sliding scale (ie, the stamp duty would be higher
on an aggregated value than it would be on multiple smaller
values).
The Commissioner of State Revenue does have discretion not to
aggregate where the transfers were separate lots "genuinely
available for separate sale" (and the purchase of which was
not dependent on the purchase of the other properties).
Under Revenue Ruling DA.026 it is suggested that where the
purchaser enters into a contract to purchase more than one property
and receives a discount, this discretion will not apply, and the
aggregation rules will be enforced. In this case, the sale is
considered to be under a single transaction even in the
circumstance where the separate properties are purchased in
different legal entities.
Unencumbered Value
The SRO may also consider any discounts received on the purchase
of dutiable property, and deem the dutiable value of the transfer
to be higher than the actual purchase price of the property.
The SRO calculates stamp duty on the "unencumbered value"
of dutiable property, which is defined as the amount for which the
property might reasonably have been sold in the open market at the
time the contract of sale was entered into. This will need to be
taken into consideration when a discount is applied to the purchase
of a property, in addition to the aggregation rules outlined
above.
Land Tax
It is important that the SRO is notified when a Trust acquires
property.
Properties owned by Trusts are generally subject to a
surcharge.
For 2011, the surcharge, applies to Victorian landholdings between
$25,000 and $3 million. The surcharge is 0.375% for landholdings
between $25,000 and $1.8 million.
The surcharge tapers away for trusts with aggregate taxable
landholdings valued between $1.8 million and $3 million. The top
rate of land tax (applying to taxpayers with landholdings valued
above $3 million) is not affected by the surcharge.
The SRO needs to be notified within thirty (30) days of settlement
and for practical purposes this notification is usually completed
and lodged by the conveyancer acting for the purchaser.
Should you wish us to perform a review of your current Land Tax
position please contact your Moore Stephens Relationship Partner to
arrange a meeting.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.
