Page 2548 - Week 07 - Thursday, 18 June 2009
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leases was inadvertently omitted and not transferred with the long-term lease provisions. The amendments will align the Duties Act with the original intention and existing administrative practice. They will apply from 29 November 2006, which is the date that the previous amendments became effective. This will ensure that holders of long-term residential leases will not be disadvantaged by the previous omission.
The second of the amendments put forward by the bill is an anti-avoidance provision that aims to eliminate a potential landholder duty loophole that exists in the Duties Act. Landholder duty is imposed in order to ensure that an indirect transfer of land using a corporate or trust structure has the same taxation consequences as a direct transfer of land. The potential loophole exists where a person alters the capacity in which they hold an interest in a landholder and thereby avoid paying duty. An example of this is where a person who holds a unit or share in a landholder subsequently declares a trust over that unit or share.
It should be noted that this loophole was recently closed by New South Wales and Victoria in their respective duties acts. In light of the large amount of revenue previously lost in New South Wales due to the practice, it is prudent for the ACT to do the same in order to avoid potential losses in revenue. These amendments will address this issue by providing that duty under the landholder provisions occurs when a person who holds an interest in a landholder changes the capacity in which they hold that interest.
The third of the amendments made by the bill also relates to landholder duty. The amendment introduces an exemption for certain property trust restructures known as top-hatting arrangements. Top-hatting occurs where a group of unit trusts and companies interpose a unit trust to become the new head trust of the group. This means that the head trust acquires all the ownership interests of the group. Investors’ interests are not changed as a result of the restructure.
The main advantage of interposing a trust in this manner is that it makes property trusts more competitive in both the domestic and international marketplaces. The commonwealth has recently implemented an exemption from capital gains tax for top-hatting restructures. New South Wales and Victoria have both made legislative changes implementing a landholder duty top-hatting exemption based on the commonwealth’s capital gains tax exemption.
To ensure that the top-hatting exemption is not vulnerable to abuse, robust anti-avoidance provisions have been included. In particular, the provisions contain the ability for the Commissioner for ACT Revenue to impose conditions on the grant of the exemption and to revoke it in certain circumstances. These provisions have been modelled on corresponding provisions in Victoria and New South Wales, and will provide an effective mechanism to prevent abuse of the exemption. The bill also contains objection and appeal rights for decisions made in relation to the top-hatting exemption.
I thank members for their contributions and their support of the Duties Amendment Bill 2009.
Question resolved in the affirmative.
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