A relevant acquisition is generally charged with duty at the same rates that apply to land transfers under Chapter 2 of the Duties Act 2000 (the Act).

Different calculation methods and concessions apply, however, depending on the nature of the landholder, the relevant acquisition and the value of the land holdings. One such concession is the phasing-in duty formula in s89 of the Act which applies when the value of a landholder’s land holdings in Victoria is between $1 million and 2 million.

In certain cases, the Commissioner may also provide a concession on the calculation of duty on a relevant acquisition in a landholder which owns, or is deemed to own, certain leasehold land or primary production land.

Private landholders

The same rates of duty that apply to land transfers under the Act apply to relevant acquisitions in private landholders (being a private company, private unit trust scheme or wholesale unit trust scheme). However, a different method of calculation applies depending on whether the relevant acquisition in the private landholder is the result of:

  • The acquisition of a single interest or aggregated interests on the same day,
  • Aggregated interests over time, or
  • A further interest

Single interest or aggregated interests on the same day

When a relevant acquisition in a private landholder results from an acquisition that is of itself a significant interest, or the acquisition of interests on the same day that aggregate to a significant interest, duty is charged on the amount calculated by multiplying the unencumbered value of all land holdings of the landholder in Victoria at the date of acquisition by the percentage interest acquired as a result of the relevant acquisition.

The duty payable on a relevant acquisition made when a person acquires a 70 per cent interest in a private landholder which has $10 million in Victorian land holdings is calculated as follows.

 

Value of landholder’s Victorian land holdings $10,000,000
Interest acquired 70%
Dutiable value ($10m x 70%) $7,000,000
Relevant rate of duty 5.5%
Duty payable on relevant acquisition ($7m x 5.5%)

$385,000

Aggregated interests over time

When a relevant acquisition arises from the aggregation of an interest acquired by a person in a private landholder with other interests acquired in the landholder by the person, an associated person or any other person in an associated transaction, duty is charged at the rates set out in Chapter 2 on the aggregate of the amounts separately calculated in respect of the interest acquired by the person and each of the other interests that comprise the relevant acquisition that were acquired in the three years preceding the acquisition of the interest by the person.

The duty payable on a relevant acquisition of a 24 per cent interest in a landholder that is a private unit trust scheme comprising the aggregation of four 6 per cent interests acquired over a four-year period when the Victorian land holdings of the landholder in the first two years were valued at $8 million and in the latter two years were valued at $10 million is calculated as follows.

 

Value of landholder’s Victorian land holdings in 4th year $10,000,000
Interest acquired in 4th year 6%
Dutiable value of interest ($10m x 6%) $600,000
Value of landholder’s Victorian land holdings in 3rd year $10,000,000
Interest acquired in 3rd year

6%

Dutiable value of interest ($10m x 6%) $600,000
Value of landholder’s Victorian land holdings in 2nd year $8,000,000
Interest acquired in 2nd year 6%
Dutiable value of interest ($8m x 6%) $480,000
Value of landholder’s Victorian land holdings in 1st year $8,000,000
Interest acquired in 1st year 6%
Dutiable value of interest ($8m x 6%) $480,000
Dutiable value of relevant acquisition (value of 4th, 3rd and 2nd year interests) $1,680,000
Relevant rate of duty 5.5%
Duty payable on relevant acquisition ($1.68 million x 5.5%) $92,400

Further interest

When a relevant acquisition has previously occurred in a landholder, and a further interest is acquired in the landholder, duty on the further interest is calculated by determining the duty that would be chargeable on the prior interests acquired plus the further interest and subtracting from that amount the duty that would be chargeable in respect of the prior interests.

The reference to duty chargeable is not a reference to duty actually paid on the prior interests at the time of their acquisition, but rather a reference to the duty that would be chargeable at the time of the acquisition of the further interest.

For example, a person made a relevant acquisition of a 25 per cent interest in a landholder that was a private unit trust scheme and land rich in June 2010. At that time, the Victorian land holdings of the scheme were valued at $10 million and the duty paid in respect of the acquisition was $137,500 ($10 million x 25 per cent x 5.5 per cent).

In July 2012 that person acquired a further 10 per cent interest in the scheme. By July 2012, the value of the scheme’s Victorian land holdings had increased to $12 million. The duty payable on the acquisition of the further interest is calculated as follows.

 

Value of scheme’s Victorian land holdings in July 2012 $12,000,000
Sum of further and prior interests 35%
Dutiable value of further and prior interests ($12m x 35%) $4,200,000
Relevant rate of duty 5.5%
Duty payable on further and prior interests

$231,000

Dutiable value of prior interest ($12m x 25%) $3,000,000
Relevant rate of duty 5.5%
Dutiable payable on prior interest ($3m x 5.5%) $165,000
Duty payable on acquisition of further interest ($231,000 - $165,000) $66,000

Please refer to s86 of the Act and more information about the calculation of duty (Revenue Ruling DA-055).

Public landholders

A relevant acquisition in a public landholder (being a listed company or public unit trust scheme) is chargeable at a concessional rate of 10 per cent of the duty that would be chargeable on a transfer of all of the Victorian land holdings of the landholder (effectively as if a 100 per cent acquisition had been made in the landholder).

This is the case, even if the relevant acquisition is not the acquisition of an interest of 100 per cent in the landholder. The duty is calculated based on the value of the land holdings of the landholder at the date of the relevant acquisition.

The concessional rate of duty does not apply in respect of a relevant acquisition in a listed company or listed trust that has been a listed company or listed trust for less than 12 months, a declared public unit trust that has been registered as such for less than 12 months or a widely held trust that has satisfied the definition of a widely held trust for less than 12 months. In these circumstances, the duty will be calculated as if the relevant acquisition was made in a private landholder. 

For example, the duty payable on a relevant acquisition where a bidder has acquired 95 per cent of the shares in a listed company under a takeover bid when the Victorian land holdings of the scheme were valued at $20 million is calculated as follows:

Duty calculation of a relevant acquisition in a public landholder

Value of landholder’s Victorian land holdings $20,000,000
Deemed interest acquired 100%
Dutiable value of interest ($20m x 100%) $20,000,000
Relevant rate of duty 5.5%
Duty otherwise payable on interest ($20m x 5.5%)

$1,100,000

Concessional rate of duty payable 10%
Duty payable on relevant acquisition ($1.1m x 10%) $110,000

Note: if the bidder subsequently acquires the remaining 5 per cent of the shares in the company, no duty is payable in respect of this further acquisition by the bidder. This concession only extends to the bidder and not to associated persons of the bidder.

Please refer to ss. 87 and 88 of the Act for more information about the calculation of duty (Revenue Ruling DA-055).

Phasing-in formula and deduction for marketable securities duty

Where a landholder’s land holdings in Victoria are between $1 million and $2 million, duty is calculated in accordance with the formula [(A - $1 million)/$1 million] x B, where:

  • “A” is the unencumbered value of the land holdings in Victoria of the landholder at the time the relevant acquisition was made, and
  • “B” is the duty that, apart from the application of the formula, would be chargeable under the provisions of the Act

A deduction is also available for any marketable securities duty paid in Victoria or another jurisdiction in Australia on the acquisition of an interest in the landholder.

Please refer to ss. 89 and 89A of the Act for more information about the calculation of duty (Revenue Ruling DA-055).

Certain leasehold estates and primary production land concessions

In determining the duty payable on a relevant acquisition, the Commissioner provides the following concessions in relation to landholders whose land holdings include leasehold estates and/or primary production land.

It should be noted that leasehold estates are a land holding for the purposes of the landholder provisions and must be taken into account when determining whether the company or unit trust scheme is a landholder.

In cases involving the acquisition of an interest in a landholder whose land holdings comprise:

  • Only leasehold estates that are not dutiable property under s10(1)(a) of the Act – no duty will be payable on the acquisition as it will be exempt from duty under s89D(a),
  • Leasehold estates (none of which are dutiable property under s10(1)(a) of the Act and freehold land – duty will be payable only by reference to the landholder’s Victorian freehold land as s89E will apply to exclude the non-dutiable leasehold estates from the duty calculation), and
  • Leasehold estates (all of which are dutiable property under s10(1)(a) of the Act and freehold land – duty will be payable by reference to all the landholder’s Victorian land holdings (both leasehold and freehold estates))

In prescribed circumstances, s56 of the Act exempts the transfer of land used for primary production from duty. By virtue of ss. 89D(a) and 89E, this exemption is relevant in determining the duty consequences on relevant acquisitions in landholders whose land holdings include primary production land.

Consequently, where the conditions for the application of s56 are satisfied, the Commissioner has determined the following treatment in respect of a relevant acquisition in a landholder whose Victorian land holdings comprise:

  • Only primary production land, the acquisition will be exempt from duty, and
  • Primary production land and non-primary production land, duty will be calculated by reference to the value of the non-primary production land only because s89E of the Act will apply to exclude the primary production land from the duty calculation

Please refer to ss. 10(1)(a), 56, 89D and 89E of the Act and more information on obligations on making a relevant acquisition and duty calculation (Revenue Ruling DA.055).