Page 3090 - Week 08 - Thursday, 7 August 2008

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In essence, the objective of this amending legislation is to protect the revenue base of the territory by ensuring that relevant transactions are subject to conveyancing duty and not the lower marketable securities rate of duty. It does this by ensuring that transactions that are essentially conveyancing transactions are subject to the rate of duty that is appropriate to conveyancing.

To achieve this outcome, it has been necessary to amend the legislative regime to incorporate both direct and indirect transactions that involve land. It is in the area of indirect transactions where principals of entities may attempt to circumvent the payment of the higher rate of duty that these provisions will apply. In addition, amendments are being proposed that will make it quite clear when the principals of an entity have a relevant interest in land through the proportion of ownership that those principals have in the entity. These amendments are fairly technical but they target an important issue with potentially significant revenue implications. The opposition will be supporting the bill.

MR MULCAHY (Molonglo) (5.41): Mr Smyth has covered some of this in his remarks. According to the explanatory statement for this bill, the purpose of the bill is to tighten anti-avoidance provisions relating to the duty on transfers of land. This bill targets the effective transfer of land through the transfer of shares or units in a private company or private unit trust scheme or a wholesale unit trust scheme holding land. In particular, it lowers the threshold for the imposition of duty on these kinds of transactions.

Currently, a person is able to acquire an interest in a private company or private unit trust up to a certain point without being subject to landholder duty for land held by the scheme in which they are acquiring an interest. The current level at which the constructive ownership provisions begin to operate in this context is determined by the majority interest test set out in section 83 of the Duties Act. The section defines a majority interest in a company as an interest of at least 50 per cent of the property of that company.

The bill that is before us today seeks to replace the existing majority interest test and reduce this threshold to a new “significant interest” test which is set out in proposed new section 83 of the bill. This section defines a significant interest in a landholder as an interest of at least 20 per cent of the property of a private unit trust or 50 per cent of the property of a private company. This change means that the test for private companies remains the same but the test for unit trusts involves a lower threshold. The result of this change is that transfers of units in a unit trust scheme are more likely to incur duty with respect to the landholdings of the scheme than has previously been the case. Given the nature of unit trust schemes, which can often have quite large landholdings, it seems to me to be reasonable that these should be subject to a lower threshold for constructive ownership than other forms of indirect landholding.

Another change proposed in this bill is that it will expand the aggregation provisions regarding separate acquisitions of land that are taken to be aggregated for the purposes of duty calculation under the Duties Act. The changes in the bill target acquisitions of land under contractual options to purchase. An acquisition that arises as a result of exercising such an option is aggregated with other acquisitions for the past three years.


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