Landholder duty – Duty concession on the interposition of a unit trust between stapled security holders and the stapled entities

DA-047v4

This ruling replaces DA-047v3 to reflect an amendment made to section 87 of the Duties Act 2000 which took effect from 13 December 2023. This provision was amended to confirm that the concessional rate of duty in section 87(1) does not apply to a relevant acquisition in a public landholder that is also eligible for the concessional rate of duty under Part 2 of Chapter 11 of the Duties Act 2000.

Preamble

Subdivision 124-Q in Part 3-3 of Chapter 3 of the Income Tax Assessment Act 1997 (Cth) (ITAA97) provides capital gains tax roll-over relief on the reorganisation of stapled entities in certain circumstances. Specifically, roll-over relief is available for holders of ownership interests in stapled entities (exchanging members) where, under a scheme for reorganising the stapled entities’ affairs, they dispose of those interests in exchange for interests in an interposed unit trust. The relief applies to roll-overs that take place on or after 1 July 2006.

When an exchanging member, or the trustee of the interposed trust, makes a relevant acquisition due to a reorganisation of listed stapled entities in accordance with Subdivision 124-Q on or after 1 July 2019, Division 1B in Part 2 of Chapter 11 of the Duties Act 2000 (Vic) (Duties Act) provides a concessional rate of duty in specified circumstances. The concessional rate of duty under Division 1B is 10% of the duty that would otherwise be payable on the relevant acquisitions. For Subdivision 124-Q roll-overs that occurred between 1 July 2008 and 30 June 2019, the former Division 1B provided a complete exemption from duty on relevant acquisitions arising from such roll overs.

The purpose of this Revenue Ruling is to clarify the circumstances in which the concessional rate of duty under Division 1B will apply to relevant acquisitions arising on the reorganisation of listed stapled entities in accordance with Subdivision 124Q of ITAA97. This ruling is provided as a guide only and is not exhaustive. If your circumstances are not covered in this ruling, please apply for a private ruling in accordance with Revenue Ruling GEN.009v3 – General Information on Private Rulings.

Ruling

Application for concession under Division 1B

Section 124-1045 of the ITAA97 sets out the requirements for an exchange of stapled securities to be treated as a roll-over for the purposes of Subdivision 124-Q. There are 2 ways in which an exchange of securities can occur:

1. The new trust case – a new trust is interposed between the security holders of the stapled entities (that is, the exchanging members) and the stapled entities. In the new trust case, the exchanging members acquire ownership interests in the new interposed trust, and cease to own their ownership interests in the stapled entities. The new trust will acquire all the exchanging members’ ownership interests in the stapled entities. 
2. The existing trust case – one of the trusts comprising the stapled entities is interposed between the exchanging members and the other stapled entities. In the existing trust case, the exchanging members retain their ownership interests in the interposed trust, but cease to own their ownership interests in the remaining stapled entities. The interposed trust acquires all of the ownership interests in the remaining stapled entities from the exchanging members.

In both cases, if the interposed trust or any of the previously stapled entities is a landholder, either the exchanging members, or the trustee of the interposed trust, may have a liability to duty under the landholder provisions. The specific duty consequences will depend on the way in which the exchange of securities occurs (including the de-stapling process and the timing of the transactions between the exchanging members and the trustee of the interposed trust). In the case of the interests acquired by exchanging members in an interposed trust, their individual acquisitions may not amount to a significant interest. However, their interests in the interposed trust will be taken to have been acquired in an associated transaction. For further information on associated transactions, refer to Revenue Ruling DA.057. Accordingly, the exchanging members may make a relevant acquisition of 100% in the interposed trust. 

The purpose of Division 1B is to provide a concession from duty for both the exchanging members and the trustee of the interposed trust if a relevant acquisition is made by either of them on the reorganisation of the stapled group in accordance with Subdivision 124-Q (provided certain conditions are met). Section 250DI of the Duties Act will be interpreted in accordance with the underlying intention of Division 1B. On this basis, an exchanging member, or the trustee of the interposed trust, who makes a relevant acquisition in the course of, or as a result of, a roll-over may request that the Commissioner apply the concessional rate of duty under Division 1B. Furthermore, for the avoidance of doubt, the concession under Division 1B may apply to the relevant acquisition by the trustee of the interposed trust even if the exchanging members do not make a relevant acquisition.

Application of the concession

Under section 250DI of the Duties Act, the concession will apply if the relevant acquisition is made in the course of, or as a result of a roll-over and the requirement in paragraph (a) or (b) have been met. 

The purpose of Division 1B is to provide a concession from duty on the restructure of listed stapled entities in accordance with Subdivision 124-Q of ITAA97. The definition of roll-over reinforces this purpose. It requires that the relevant acquisition must be made in the course of, or as a result of, a roll-over that occurs on or after 1 July 2008 in the circumstances set out in section 124-1045 of ITAA97. The conditions in paragraphs (a) and (b) relate to the status of the stapled entities. Although subdivision 124-Q provides roll-over relief for both listed and unlisted entities, the effect of these paragraphs is that the concession provided by Division 1B is available only for the reorganisation of listed stapled entities.

Specifically, section 250DI provides that the Commissioner must be satisfied the shares or units in the stapled entities to which the roll-over relates:

1. were listed at the time the relevant acquisition was made, or
2. are intended to be listed within the period of 3 years commencing on the date on which the relevant acquisition was made.

As part of the restructure process the existing stapled entities will be delisted, and the interposed trust will be listed in its place. In some cases, depending on the practice adopted by the Australian Stock Exchange when delisting the stapled entities, it is possible that the stapled entities may not be listed when the trustee of the interposed trust acquires the interests in the stapled entities from the exchanging members. If this occurs, the Commissioner will treat the stapled entities as listed for the purposes of section 250DI of the Duties Act and the concessional rate of duty available under that section will apply. However, where a relevant acquisition in a public landholder is eligible for the concessional rates of duty under both section 250DI and section 87(1) of the Duties Act, only the concessional rate of duty under section 250DI applies.

As noted above, a second relevant acquisition may also be made in the interposed trust by the exchanging members. The second relevant acquisition will also be eligible for the concessions under section 250DI.

Section 250DI(b) applies to unlisted stapled entities that were intended to be listed, or in the process of being listed prior to a decision to restructure under Subdivision 124-Q. Where a decision is made to list an interposed trust instead of proceeding with the listing of stapled entities, the concessional rate of duty will apply to the restructure and any resulting relevant acquisitions provided that the stapled entities were to be listed within 3 years of the date of the relevant acquisitions. Evidence of the intention to list the stapled entities and the interposed trust must be provided at the time of the relevant acquisition(s) through documentation such as draft product disclosure statements or other public offer documents, applications for listing or other communications with the Australian Stock Exchange, trustee minutes and/or communications with advisers.
 

Commissioner of State Revenue

Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN.001.