Duty exemptions for non-standard transactions
An exemption or exclusion from duty was not previously available for a non-standard transaction. Duty exemptions were only available if the dutiable transaction was of the type that qualified as an entry transaction, which did not extend to non-standard transactions.
By operation of the State Taxation Further Amendment Act 2024, and with effect from 4 December 2024, new upfront duty exemptions and exclusions are available for non-standard transactions provided full duty was paid when the property entered the CIPT reform.
The new non-standard transactions are:
- the transfer, assignment, grant or surrender of a dutiable lease (being a lease of a kind referred to in section 7(1)(b)(v) or (va) of the Duties Act) over tax reform scheme land
- a transaction involving an interest in fixtures that is created, dealt with or held separately to an estate or interest in land (being dutiable property referred to in section 10(1)(ad) of the Duties Act) located on tax reform scheme land
- the acquisition of an economic entitlement in relation to tax reform scheme land.
The new upfront duty exemptions operate differently to the duty exemptions for a standard transaction.
We address each of the new upfront duty exemptions for a non-standard transaction in turn below.
The 3-year rule upfront duty exemption for a non-standard transaction
A new upfront duty exemption is now available for a non-standard transaction where at least 3 years has elapsed between:
- the entry date for the tax reform scheme transaction to which the non-standard transaction relates; and
- the date on which a contract or other agreement or arrangement for the non-standard transaction is entered into.
The new upfront duty exemption for a non-standard transaction is only available if, for the purpose of calculating the duty payable on the entry transaction and on the acquisition of any further interests in the tax reform scheme land, the value of the land:
- was not reduced by a lease over the land or part of the land; or
- did not exclude the value of an interest in fixtures referred to in section 10(1)(ad) of the Duties Act located on the land; or
- was not reduced by an economic entitlement in relation to the land.
These additional requirements only apply to a non-standard transaction (and not a standard transaction) recognising that non‑standard transactions may be structured to reduce the duty payable on the entry transaction and when any further interest in the tax reform scheme land is acquired.
The 100% interest upfront duty exemption for non-standard transactions
The first requirement for this duty exemption is that either:
- the entry interest for the land to which the non-standard transaction relates was a 100% interest; or
- the entry interest for the land to which the non-standard transaction relates and any further interest obtained in the land before the non-standard transaction amounted to a 100% interest.
The second requirement is that for the purpose of calculating the duty payable on the entry transaction and on the acquisition of any further interests in the tax reform scheme land, the value of the land:
- was not reduced by a lease granted over the land or part of the land; or
- did not exclude the value of an interest in fixtures referred to in section 10(1)(ad) of the Duties Act located on the land; or
- was not reduced by an economic entitlement in relation to the land.
The second requirement recognises that the duty paid on the entry transaction for the land and when any further interest in the tax reform scheme land was acquired may have been impacted by the circumstances set out above and therefore it is not appropriate to provide an upfront exemption from duty.
Example 1
On 1 July 2025, an interest of 100% in land is transferred under an entry transaction and the land becomes tax reform scheme land. At the time of the entry transaction, fixtures referred to in section 10(1)(ad) of the Duties Act were located on the land.
The value of the fixtures located on the land were not taken into account when determining the duty payable on the entry transaction. This is because the fixtures were not transferred to the transferee of the land or an associated person of the transferee of the land. On 1 July 2026, the fixtures are transferred to a third party. This is a non-standard transaction.
Although the qualifying interest under the entry transaction was 100%, the upfront duty exemption is not available. This is because the value of the fixtures located on the land were not included in calculating the duty payable on the entry transaction. If the value of fixtures were included in the calculation of duty payable on the entry transaction, the non-standard transaction on 1 July 2026 would be exempt from duty.
Example 2
On 1 January 2026, an interest of 100% in land is transferred under an entry transaction and the land becomes tax reform scheme land. The duty payable on the entry transaction was nominal as the value of the land was reduced by a 99-year lease over the land that only required a peppercorn rental to be paid.
On 1 December 2026, the leasehold interest is transferred. This is a non-standard transaction. Although the qualifying interest under the entry transaction was 100%, the upfront duty exemption is not available.
This is because the value of the land for the purpose of calculating the duty payable on the entry transaction was reduced because of the lease over the land.
The Commissioner’s discretion and legislative factors
An upfront duty exemption will be available for most non-standard transactions. However, if an upfront duty exemption is not available, the Commissioner may reduce the duty payable on a non-standard transaction relating to tax reform scheme land if the Commissioner is satisfied that it is appropriate to do so having regard to various legislative factors listed below:
(Matter 1) the quantum of the entry interest and any further interests acquired in the tax reform scheme land.
Matter 1 is intended to recognise the duty that has been previously paid with respect to the tax reform scheme land as part of the land entering the reform.
Example 3
In December 2024, a 60% interest in land with a qualifying use is transferred. This is an entry transaction for the land. In January 2027, a lease within the meaning of section 7(1)(v) of the Duties Act is granted over the land. This is a non-standard transaction. Neither of the upfront duty exemptions for a non-standard transaction apply.
In determining whether it is appropriate for the non-standard transaction to be exempt from duty, the Commissioner must have regard to the quantum of the entry interest (60%) and any further interest acquired in the tax reform scheme land (0%). Having regard to this matter only, the duty payable on the non-standard transaction is likely to be reduced by 60% in recognition that duty was already paid on 60% of the land as part of the entry transaction.
However, this outcome may change as the Commissioner may also have regard to other relevant matters.
(Matter 2) the extent to which the value of the tax reform scheme land, for the purposes of calculating the duty payable on the entry transaction and on the acquisition of any further interests in the land—
- was reduced by a lease over the land or part of the land; or
- excluded the value of an interest in fixtures referred to in section 10(1)(ad) located on the land; or
- was reduced by an economic entitlement in relation to the land.
Matter 2 is intended to recognise the impact certain matters had on the duty payable on the entry transaction and any subsequent interests acquired. For example, if the duty payable on the entry transaction for the property was reduced by a lease over the property or part of the property. The greater the impact the less likely the Commissioner will exercise the Commissioner's discretion.
Example 4
In March 2025, a 100% interest in commercial land is transferred. This is an entry transaction for the land. The duty payable on the entry transaction was reduced by a long-term lease over the land with peppercorn rental. The lease was initially granted for 90 years however at the time of the entry transaction there was only 2 years left on the lease. In April 2026, the leasehold interest was surrendered.
This is a non‑standard transaction being the surrender of a lease referred to in section 7(1)(v) of the Duties Act. Although the qualifying interest under the entry transaction was 100%, the upfront duty exemption is not available because the duty payable on the entry transaction was reduced by a lease over the land.
However, at the time of the entry transaction there was only a short period before the lease was due to expire. Therefore, significant duty was paid on the entry transaction as the value of the land was not heavily suppressed because of the lease. As a result, this circumstance is in favour of reducing the duty payable on the non-standard transaction or exempting the non-standard transaction from duty. If only nominal duty was paid on the entry transaction because the lease heavily suppressed the value of the land, then this factor would weigh heavily against reducing or exempting the duty payable on the non‑standard transaction.
(Matter 3) if a specified transaction occurred on or after 1 July 2024 but before the entry transaction for the land, the period of time that elapsed between the specified transaction and the entry transaction occurring.
Matter 3 is intended to address the trade-off between when duty is paid on a transaction on or after 1 July 2024 and when the commercial and industrial property tax is to commence in respect of that land. Under the commercial and industrial property tax reform, duty exemptions are granted on the basis that the commercial and industrial property tax is to commence in less than 10 years.
Example 5
A lease is transferred in August 2024. Duty is paid on the transfer of the lease on the basis the transfer is a dutiable transaction under section 7(1)(b)(va) of the Duties Act. The land (subject to the lease) is transferred in November 2024.
This is an entry transaction and the land becomes tax reform scheme land. The leasehold interest is again transferred in 2026. This is a non‑standard transaction. As full duty was paid on the transfer of the lease on or after 1 July 2024, and later in the same calendar year duty was paid on the entry transaction for the land, this is a matter in favour of exercising the discretion to exempt the transfer of the leasehold interest in 2026, subject to the consideration of any other relevant matters.
However, if the entry transaction and subsequent non‑standard transaction occurred in 2044 (being 20 years after duty was first paid on the transfer of the lease) this goes against exercising the discretion to exempt the non-standard transaction, notwithstanding duty was paid on the lease on or after 1 July 2024.
The fact the earlier payment of duty occurred long before the entry transaction goes against granting the exemption. The trade-off with granting an exemption and the commencement of the commercial industrial property tax is not present.
(Matter 4) if a specified transaction occurred after the entry transaction for the land but before the non‑standard transaction, the duty that was paid on the specified transaction.
Example 6
In August 2024, a 100% interest in land is transferred by an entry transaction and the land becomes tax reform scheme land. The land was subject to a long-term lease at the time of the entry transaction and only nominal duty was paid on the transfer of the land.
In August 2026, the lease is transferred. This is a non-standard transaction that is not otherwise exempt from duty as the value of the land at the time of the entry transaction was reduced because of the lease over the land. In January 2027, the leasehold interest is again transferred. This is also a non-standard transaction and again neither of the upfront duty exemptions apply. However, the fact that full duty was paid on the transfer of the leasehold interest in August 2026 (being a specified transaction), goes in favour of the discretion being exercised to provide a duty exemption for the non-standard transaction that occurred in January 2027.
If the leasehold interest transferred in 2026 related to 50% of the land and the leasehold interest transferred in January 2027 related to the other 50% of the land the duty payable for the 2026 transfer does not support an exemption or reduction being granted.
(Matter 5) any other matter that the Commissioner considers relevant.
Matter 5 authorises the Commissioner to have regard to any other matter that the Commissioner considers relevant.
Exclusion of the value of land holdings (relating to tax reform scheme land) from a landholder duty assessment
The value of the land holdings held by a landholder are taken into account in determining if the relevant entity is a landholder under Part 2 of Chapter 3 of the Duties Act.
However, the value (or part of the value) of certain land holdings over or located on tax reform scheme land, may be excluded from the duty calculation on a relevant acquisition in certain circumstances.
These land holdings are:
- A dutiable lease (i.e. a lease of a kind referred to in section7(1)(b)(v) or (va) of the Duties Act over tax reform scheme land;
- An interest in fixtures (ie within the meaning of section 10(1)(ad) of the Duties Act) located on tax reform scheme land; and
- An interest in tax reform scheme land that is taken to be beneficially owned under section 32XD of the Duties Act (ie an economic entitlement).
Importantly, the land holdings must also have a qualifying use on the date of the relevant acquisition. The unencumbered value of these land holdings held by the landholder will be excluded from the calculation of duty chargeable on a relevant acquisition if:
- a period of at least 3 years has elapsed between the entry date for the tax reform scheme land and the date on which a contract or other agreement or arrangement for the relevant acquisition is entered into; or
- the entry interest for tax reform scheme land is 100%; or
- the entry interest and any further interest acquired in the tax reform scheme land before the relevant acquisition amounts to a 100% interest.
Only one of the above conditions is required for the exclusion to apply.
An additional requirement must also be satisfied. This requirement is in similar terms to the duty exemption in Chapter 2 of the Duties Act that applies to a non‑standard dutiable transaction. For the exclusion to be available, it must be the case that for the purpose of calculating the duty payable on the entry transaction and on the acquisition of any further interests in the tax reform scheme land, the value of the land:
- was not reduced by a lease granted over the land or part of the land; or
- did not exclude the value of an interest in fixtures referred to in section 10(1)(ad) of the Duties Act located on the land; or
- was not reduced by an economic entitlement in relation to the land.
The Commissioner also has the authority to exclude or partially exclude the unencumbered value of certain land holdings that are not excluded under the upfront duty exemptions. As in the case of the Commissioner's discretion provided under Chapter 2 of the Duties Act in relation to dutiable transactions, the Commissioner must have regard to certain matters. These matters are:
- (Matter 1) the quantum of the entry interest and any further interests acquired in the tax reform scheme land; and
- (Matter 2) the extent to which the value of the tax reform scheme land, for the purposes of calculating the duty payable on the entry transaction and on the acquisition of any further interests in the land—
- was reduced by a lease over the land or part of the land;
- excluded the value of an interest in fixtures referred to in section 10(1)(ad) located on the land; and
- was reduced by an economic entitlement in relation to the land; and
- (Matter 3) if a specified transaction occurred on or after 1 July 2024 but before the entry transaction for the land, the period of time that elapsed between the specified transaction and the entry transaction occurring; and
- (Matter 4) if a specified transaction occurred after the entry transaction for the land but before the non‑standard transaction, the duty that was paid on the specified transaction; and
- (Matter 5) any other matter that the Commissioner considers relevant.
The Commissioner’s discretion that is available under Chapter 3 of the Duties Act (for landholder duty) is intended to be applied consistently with the discretion in Chapter 2 of the Duties Act (for transfer duty). Accordingly, the examples provided in the context of a dutiable transaction that explain the matters the Commissioner must have regard to in determining whether to apply the discretion to a subsequent dealing that is dutiable transaction are also illustrative on how it is intended for the discretion for a relevant acquisition to apply, with any modifications required for the different context.
