The proposed landholder duty to commence on 1 July 2012, as announced in the Victorian Budget papers, is not good news for the businesses that own their own premises and operate through a company or trust structure because it means more of these entities will be subject to land transfer duty, said Hall & Wilcox partner Rodney Richard.
Mr Richard said people will also need to be careful when buying or restructuring entities or transferring shares or units in these entities from 1 July 2012 as this could trigger this type of duty.
The landholder duty is part of the State Government's changes to the Duties Act 2000 to introduce a 'simpler set of provisions' to replace the land rich duty provisions.
Currently, to be a land rich entity, the entity must have land holdings in Victoria with a value of $1 million or more and its land holdings in all places must comprise 60% more of the value of all its property (both land and other property).
Under the landholder duty model, the 60% test will be removed and an entity will be land rich simply if it owns land in Victoria that exceeds a certain value. If the land value remains at $1 million, many businesses will be disadvantaged by the change.
"Small and large businesses will be caught out by this duty. In other states, the landholder duty model extends to takeovers of listed companies and unit trusts, which may not be good for the big end of town, but it may be good for the property trusts if they no longer have to worry about whether they qualify as wholesale or public unit trusts," Mr Richard said.
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