The VCAT decision in Oliver Hume Property Funds v Commissioner of State Revenue held that units issued to investors under a capital raise via an Information Memorandum (IM) to fund the acquisition of a property in Victoria are to be aggregated as associated transactions for the purpose of the landholder duty rules.
This means that investors acquiring an interest in a Fund through the IM after the Fund has entered into a contract to acquire property may be subject to landholder duty, effectively imposing double duty on the transaction.
The taxpayer is appealing the decision. In the meantime, capital raisings with respect to Victorian property will need to be more carefully managed. The State Revenue Office (SRO) is unlikely to provide a private ruling with respect to this issue until the appeal is determined. The SRO has stated in discussions that there were particular circumstances in the Oliver Hume case that led to this outcome. However, the relevant facts as referred by VCAT noted nothing significantly different from any other capital raising through an IM or Product Disclosure Statement (PDS). It seems that the 2 factors that the SRO and the court focused on were:
- in order for shares to be issued to investors, a minimum subscription needed to have been met
- there was a unity of investors, in that they were all joining together to acquire an interest for a common purpose, being a particular residential project.
Both of these factors are common in most offers under an IM or PDS. SW is working with the Property Council of Australia and Law institute of Victoria to have further discussions with the SRO to get a better understanding of what made the facts and circumstances of the Oliver Hume case different, and to understand their position with respect to reviewing capital raising transactions in the past and in the future, as we await the court’s decision.
As discussed below under Background, the legislation is drafted widely and we are of the view that the legislation needs to be amended to ensure that capital raises are not captured under the landholder duty provisions (regardless of the outcome of this Appeal). The outcome of double duty for funds trying to raise capital to acquire property in Victoria will be an inhibitor to property acquisitions in Victoria.
The outcome in this case also raises uncertainty with respect to other States (except for NSW) that have similar provisions drafted for the aggregation of associated transactions.
Background
In Victoria, landholder duty only applies to investors who acquire a significant interest an interest of 20% or more if the landholder is a private unit trust, and 50% or more if the landholder is a private company.
In determining whether a landholder has acquired a significant interest, the interests of associated persons and interests acquired in associated transactions are aggregated and treated as a single acquisition.
The term associated transaction is quite broadly drafted as an acquisition of an interest in a landholder by another person in circumstances which:
- those persons are acting in concert, or
- the acquisitions form, evidence, given effect to or arise from substantially one arrangement, one transaction or one series of transactions.
Given the broad definition in the legislation, the Victorian State Revenue Office released Revenue Ruling DA.057 Meaning of Associated Transaction which stated that the Commissioner will not regard acquisitions of interests by independent members of the public as an associated transaction if the acquisitions are made in response to a genuine public offer under a product disclosure statement or prospectus lodged with the Australian Securities and Investments Commission. However, this will not apply if:
- under the public offer, one person’s acquisition in a landholder is made subject to and conditional upon another person’s acquisition, or
- the Commissioner considers that a person is taking advantage of this concession, particularly in cases where the public offer does not convert the landholder to either a listed company or public unit trust scheme.
Example 2 of the ruling also provides an example where a private unit trust raises funds from 15 investors known to the responsible entity. In this example, the investors can apply for any number of units and their acquisition would not be conditional upon achieving a minimum level of subscription. The SRO’s view was that the investors’ acquisitions would not be considered associated transactions.
Oliver Hume case
In our view, the facts of the Oliver Hume case are no different from capital raises by other Funds through Information Memorandums (IMs). The facts were as follows:
- a special purpose entity (SPV) was established to acquire a site for a resi development
- the SPV was funded by debt and equity
- the fund was marketed to sophisticated investors so it was not an ASIC regulated raising
- the IM was distributed to investors appearing in Oliver Hume’s database. Oliver Hume held a database that had details of investors who had invested in their funds in the past
- the IM was also distributed to third parties as part of consultancy and referral agreements
- as soon as a target of $1.8 million is achieved, shares will be allotted to investors
- $1.8 million shares were offered at $1 to some 18 investors
- 14 of the 18 investors were from Oliver Hume’s database, 4 were external (2 were referred from the consultancy agreements and 2 were completely external).
The SRO commenced their investigation in 2017 and a decision was made in 2019 that the taxpayer was subject to landholder duty. As the SRO viewed the arrangement as substantially one arrangement, the interests acquired by the purchasers were aggregated and the landholder duty assessment was raised in 2020 for 99.99% of the land value in 2020. In 2021, the SRO made a determination confirming the assessment (but partially remitting penalties). Oliver Hume requested the decision be referred to VCAT.
Court decision
The court held that regard must be had to the actions and motives of both the transferor and transferee. The shareholders (although not associated with each other) each had a united purpose of becoming shareholders in the Company. The Commissioner outlined the following factors in support of the view that the transactions were related, connected and interdependent in a way that was integral to the circumstances:
- transactions stemmed from the same offer and terms outlined in the IM
- transactions were conditional on each other and interdependent, they would only occur if target subscriptions were met
- purpose of the transactions were the same – raise $1.8M as part of a syndicated managed investment vehicle for a residential development project
- investors applied to invest around the same time and under the same offer with documents defining the common purpose
- possible to infer a unity of purpose for the investors, as they agreed on the terms based on the IM to support the development of the property and agreed to the constitution which established the management structure.
The Court also held that the Commissioner’s concession provided in the Ruling has no force in law.
How SW can help
The SW team has extensive experience assisting property fund managers across a broad range of accounting and advisory services.
We can provide you with expert advice across the lifecycle of your fund, from initial setup and structuring, to capital raising, compliance, risk management and more.
Should you have any questions on the implications of this decision on your individual business circumstances, please reach out to your SW contacts listed here.
Our team will closely monitor the case and provide further information if there are any updates.
Contributor
Th regulatory framework for Managed Investment Schemes (MIS) are currently under review. The consultation paper seeks feedback on the existing regulation.
The central objective of this review is to evaluate the adequacy and relevance of the existing regulatory structure, pinpoint regulatory gaps, and explore improvements to mitigate unwarranted financial risk exposure for investors.
The review is part of the Government unveiled plans for Treasury to conduct a review of the regulatory framework governing MIS, in the October 2022‑23 Federal Budget.
Focus of the MIS review
The review will focus on the following current regulation areas:
- criteria of investor’s wholesale client status
- responsible entities’ roles and obligations.
The criteria establishing an investor’s wholesale client status
The criteria for a wholesale client is currently under review. Chapter 7 of the Corporations Act 2001 contains several tests in relation to specific products.
Current thresholds for establishing wholesale investor status include:
- where initial amount paid by investor at time of investment is at least $500,000 or
- a qualified accountant provides a certificate which states that the client’s
- net assets are equal to or exceed $2,500,000 or
- gross income for the last two financial years is at least $250,000 per annum.
Responsible entities’ roles and obligations
A key focus area of the review is the governance of the scheme. Effective governance demands ongoing vigilance for transparency and accountability.
Ensure you are aligned with current standards and practices within the Australian financial sector. It is crutial to adapt governance practices to match evolving regulations through consistent regulatory monitoring, and seek guidance from legal and regulatory specialists.
You can find the announcement detailing the primary issues under review here.
Make sure you’re ready
Each MIS provider should assess the impact on their business. The outcome of the consultation could alter the type of license needed to maintain current distribution.
MIS providers are advised to consider reviewing the consultation paper and their investor thresholds. Each case is different, we can provide expert advice that is right for your business.
How SW can help
The SW team has deep financial services sector experience, and specialises in funds management. We can provide you with the right guidance to assess the regulatory changes and their impact to your business.
Contributors:
Following the 2023/24 Federal Budget announcement to reduce the regulatory burden facing general insurers, the Australian Treasury released Exposure Draft legislation on 10 July 2023, to be applicable for income years starting on or after 1 January 2023.
Requirements for calculating tax liabilities that arise from general insurance contracts are set out in Division 321 of the ITAA 1997.
The existing legislations broadly align with the requirements of AASB 1023, which was replaced by AASB 17 as the mandatory accounting methodology for insurance contracts for financial reporting purposes from 1 January 2023.
The proposed amendments will ensure general insurers be able to continue prepare their income tax returns and align tax treatments of insurance contracts with audited financial reporting information.
Proposed changes
Liability for incurred claims
The existing rules in Subdivision 321-A provides that assessable income or deduction for an income year is determined by comparing the outstanding claims liability at the end of that year against prior income year.
In the proposed draft legislation, this would be replaced with the AASB 17 concept of “liability for incurred claims”, being the fulfilment cash flows related to past services allocated to the relevant group contracts at that date.
The amount is further adjusted to exclude any costs (e.g. claims handling costs, etc) that could not be directly attributable to a particular claim and by the present value of estimated recoveries.
Liability for remaining coverage
The existing rules in Subdivision 321-B provide that assessable income or deduction for an income year is determined by comparing the unearned premium reserve at the end of that year against prior income year using a five-step method.
Under the proposed change, this concept is replaced with “liability for remaining coverage”, defined as fulfilment cash flows relating to future services allocated to the relevant group of contracts at that date.
This amount is then adjusted for tax purposes to exclude certain items (defined within AASB 17), including onerous contracts and fulfilment cash flows that are not premiums (e.g. certain reinsurance premiums, commissions, etc.).
What has not changed?
Payment of claims
The tax treatment for payment of claims has not changed. In that regard, a claim under general insurance policies is treated as paid and therefore deductible, even in situations where funds have not actually been disbursed at year end, if the claim is settled within the income year, the relevant liability is no longer reflected as liability for incurred claim and payable by the insurer at the end of that income year.
Gross Premiums
Gross premium income received or receivable for an income year in respect of general insurance policies will continue to be included in the general insurer’s assessable income.
Application Date
The new legislation is set to apply to income years beginning on or after 1 January 2023, to align with the application of AASB 17.
Transitional arrangements are available in the first income year to ensure no permanent differences will arise for general insurers on adoption of AASB 17.
How SW can help
The Treasury is currently seeking submissions, with the consultation period concluding on 21 July 2023.
SW will be monitoring for new announcements and introduction of the bill and will keep you updated once additional information is available.
Please reach out to your SW Partner or contact for any assistance on how this may impact your business.
Contributor:
Effective from 1st August 2023, the coverage of paid family and domestic violence leave will be extended to employees working for small business employers (with fewer than 15 employees) that was previously limited to non-small business employers.
From 1 February 2023, employees of non-small business employers (employers with 15 or more employees on 1 February 2023) were able to access 10 days of paid family and domestic violence leave per annum.
What is changing?
Employees employed by small business employers (employers with less than 15 employees) will be able to access 10 days paid leave per annum from 1 August 2023. It will be a minimum leave entitlement such as annual, sick and carer’s leave.
The leave entitlement will be available to part-time and casual employees. It is not pro-rated for part-time or casual employees.
It is an entitlement upfront and will not accumulate from year to year if it is not used.
What is the leave used for?
The leave can be taken to deal with the impacts of family and domestic violence where it is not practical to do so outside of their working hours.
This might include:
- Making arrangements for their own or a family member’s safety including relocation
- Attending court or accessing police services
- Attending counselling, or appointments with medical, financial, or legal professionals.
The leave can be taken as single or multiple days, or as part days by agreement with the employer.
Can an employer ask the employee to provide evidence?
An employer can request for evidence to show the employee needs to attend to something and it is not practical to attend to it outside their work hours.
Types of evidence an employee may provide include:
- A Statutory Declaration
- Family violence support service documents
- Documents issued by a police service, or
- Documents issued by a court.
Employers must take reasonable steps to keep information about notice or evidence for family and domestic violence leave confidential.
How much is to paid to an employee?
For full-time or part-time employees leave must be paid at the employee’s full rate of pay for the hours they would have worked had they not taken leave.
Casual employees must be paid at their full rate of pay for the hours they were rostered to work in the period they took leave.
The employee’s full pay rate is their base rate plus any loadings, allowances, overtime and penalty rates, bonuses, incentive payments or other separately identifiable amounts.
Is superannuation payable ?
Paid family and domestic violence leave is considered Ordinary Time Earnings (OTE), therefore superannuation is payable.
How are these payments to be shown on the payslip?
The pay slip must not categorise the amount as family and domestic violence leave payments.
The earnings must be shown as ordinary hours of work, or another kind of payment for performing work such as an allowance, bonus or overtime payment. It is best practice to show these amounts on the pay slip in a way that makes it appear the employee has not taken leave.
Employers must also keep a record of the accrued leave balance and leave taken by employee outside of the payroll system. Payslips must not show family and domestic leave days being taken or the accrued leave balance.
What if an employers fail to comply with the family and domestic violence provisions?
Non-compliance with paid family and domestic violence leave provisions will give rise to breaches of the civil remedy provisions under Part 4-1 of the Fair Work Act, exposing employers and individuals such as managers, to prosecution and significant monetary penalties.
What does this mean for small business employers?
Employers must ensure they comply with the new laws and provide these benefits to relevant employees.
Employers should:
- Provide education and training to managers on the content of the new laws and how to deal with applications for the leave
- Communicate the relevant changes to staff
- Review and update payroll systems, policies and procedures to ensure compliance
- Consider reviewing and changing employment contracts to include new leave entitlements
- Restrict record keeping and communication to in person and in writing (in an employee’s physical file) at the workplace. This is for the safety of the victim, as domestic violence offenders will often have access to the victim’s email, work logins and physical mail
- Implement record-keeping arrangements to track leave taken and leave accrued
- Begin planning and budgeting for payments.
How can SW help
- SW has an experienced outsourcing team to assist with your payroll function. We assist employers in understanding and becoming familiar with the new requirements to make this change as easy as possible, while also ensuring employers are meeting compliance requirements
- Review and assist with updating the payroll systems to ensure compliance
- Review processing of leave payments and disclosure on payslips
- Assist with implementing and record-keeping arrangements to track leave taken and leave accrued outside of the payroll system.
在过去85年里，信永中和已帮助成千上万的个人与家族客户实现财务独立。信永中和家族理财室（SWFO）于1935年始创于澳大利亚，是成熟的多家族理财室，专门为可投资资产达2,500万美元或以上的家族提供定制家族理财室服务。
观看我们的家族办公室系列视频，了解我们可以如何帮助你保存财富，积蓄世代家业。
我们秉持开放的态度，以最优质的顾问满足您家族的各项需求，无论是本事务所内部的顾问，还是从国际业界聘请的外部专家顾问。 除了资产配置、架构、税务、银行业务、法务、移民和保险外，我们还应许多家族的需要，提供定制服务。
我们与背后的信永中和国际网络紧密互联，为客户提供全球一体化服务。 信永中和国际的总部位于香港，各成员所提供鉴证、商业咨询、企业投融资和税务咨询服务。 我们还是普安西提网络联盟的成员，联通和覆盖范围及于110多个国家，包括美国、欧洲、亚太和中东。
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Welcome news for foreign property investors in NSW as Revenue NSW removes foreign owner surcharge land tax and surcharge purchaser duty effective immediately, with refunds backdated to 1 January 2021.
UPDATE – 29/05/23
On 29 May, Revenue NSW released an update on the foreign owner surcharge, following their announcement on 21 February. Revenue NSW identified four furthe countries as additional nations that have international tax treaties with the Federal Government: India, Japan, Norway, and Switzerland.
Citizens from these countries will no longer be required to pay surcharged purchaser duty or surcharge land tax. The refund period has been extended for purchasers/transferees and landowners from these countries who paid surcharge duty or surcharge land tax on or after 1 January 2021 (previously 1 July 2021).
SW previously noted that other states may follow the NSW lead. At this time, the Victorian State Revenue Office has advised that it will continue to apply the surcharge to all foreign purchasers and absentee owners, and Queensland has taken no action.
ORIGINAL – 24/02/23
Revenue NSW has identified that the surcharge purchaser duty and foreign owner surcharge land tax provisions are inconsistent with international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany and South Africa.
Effective immediately, citizens of these countries purchasing residential-related property (in their own capacity) will no longer be required to pay NSW foreign owner surcharge duty or foreign owner land tax surcharges on those properties. Foreign owner surcharges are significant – currently the stamp duty surcharge is 8% of dutiable value and the land tax surcharge is 4% from the 2023 land tax year onwards.
Surcharge tax liabilities for non-individuals, such as corporations, trusts or partnerships that arise because of an entity’s affiliation with these nations may also be affected by the international tax treaties.
Refunds may be available where surcharge taxes have been paid by investors from these countries from 1 July 2021 onwards.
Surcharge taxes and International Tax treaties
Certain international tax treaties entered into between Australia and other relevant countries contain a non-discrimination provision. Broadly, the intent of these provisions is to ensure that a resident of the other treaty country is not subjected in Australia to any tax which is more burdensome than that imposed on an Australian resident. This is typically limited to federal taxes, such as income tax and fringe benefits tax.
However, the treaties entered into between Australia and the now exempted countries (New Zealand, Finland, Germany and South Africa) provide a more encompassing non-discrimination provision which broadly applies to taxes of every kind imposed by Australia – which would include state taxes such as land tax and duty.
In this regard, Revenue NSW have conceded that the current NSW surcharge provisions are contradictory to the tax treaty applying to these countries.
Implications for other nations
It is not yet known how the recent changes will impact on residents from other countries. There may be other international treaties with non-discrimination provisions which may also need to now be considered in light of these changes.
Application for refunds
Revenue NSW have stated that they will proactively identify customers and transactions that may be eligible for the removal of surcharge purchaser duty and surcharge land tax. Where a transaction has been identified for the removal of surcharge taxes, a Revenue NSW representative will contact the relevant person to make arrangements for the payments to be refunded.
To ensure you are eligible for the refund, Revenue NSW will require a certified copy of your current passport or citizenship certificate. Once this information has been received, refunds will be processed within 28 days.
If Revenue NSW does not contact you and you believe that you may be eligible for a refund, you can contact Revenue NSW directly in relation to the matter. If you require assistance with the application for a refund, please reach out to us at SW.
Action from other states
The Victorian State Revenue Office has stated that it has taken note of the changes in NSW and is currently considering the implications of this in relation to surcharge taxes in Victoria.
At the time of writing no other revenue office has commented on this matter, however, the relevant DTAs would potentially apply to surcharges imposed by all Australia States, and further announcements may follow.
How SW can help
In some cases, property owned by a Trust or company may be considered for the refund where the foreign citizen of these countries has a substantial interest in the entity.
If you need any assistance determining whether you are eligible for a refund or how the surcharge taxes will apply to you going forward, please reach out to us.
Contributors
Australia, 24 May 2023 – SW Accountants & Advisors (SW), a leading financial advisory firm, is pleased to announce its successful collaboration with Blackwattle Investment Partners (Blackwattle) in establishing what has been described as a ‘new generation Australian fund Manager’.
Over eight months, SW worked closely with the Blackwattle team and Hamilton Locke lawyers to provide a seamless and efficient establishment of the investment firm, ensuring that all aspects of the Group’s goals were addressed and that Blackwattle had a solid foundation to build upon.
SW involvement was key in assisting Blackwattle’s implementation of their long term incentive plan which underpinned Blackwattle’s key strategy of striving to be ‘”the most aligned fund manager in the country”. SW also facilitated the establishment of a corporate structure appropriate to the long term success of the funds management business.
Facilitating the Blackwattle difference
One of the key areas of focus was providing expert tax advice in relation to the start-up employee share scheme (ESS) provisions. A significant strategy of the fund is the requirement that portfolio managers invest in the funds they are managing, so the employee long term incentive plans were a crucial aspect.
“We invest alongside our investors and clients, with personal capital committed and corporate profits reinvested into our portfolios, there is no personal trading,” said Blackwattle Managing Director and CIO Michael Skinner. “Having significant ‘skin in the game’ means we are 100 per cent aligned to the common interest of our clients, which is uncommon in the Australian funds management industry,” he added.
SW advised on and reviewed employment agreements, employee share option plan rules, independent director agreements, and shareholder agreements to ensure compliance and optimal outcomes for Blackwattle and its investors.
Leveraging his extensive experience and expertise in the funds management industry, SW Director Simon Tucker led the advisory for Blackwattle, working with the SW team to bring valuable insights and strategic advice to Blackwattle.
“We are thrilled to have been a part of Blackwattle Investment Partners’ journey from the very beginning,” Tucker said. “Our collaboration enabled us to provide tailored solutions and guidance, supporting the firm’s growth and ensuring a solid foundation for success. We are grateful for the trust placed in us and look forward to continuing our partnership.”
The partnership between the companies was initiated by Blackwattle’s legal team Hamilton Locke, who recommended SW based on their excellent reputation in the funds management industry. The successful completion of this engagement further strengthens SW’s position as a trusted advisor in the financial sector.
Blackwattle launched with capital backing for more than five years, distribution of four investment portfolios from day one, a five person board as well as third party governance with independent chair-headed ESG and Investment Councils.
Key professionals from SW Accountants & Advisors included Justin Batticciotto, Tom Warrington and Dennis Low.
For more information about SW Accountants & Advisors and their range of services, please visit sw.com.au or contact Amanda Lee.
About SW Accountants & Advisors:
SW Accountants & Advisors is a leading financial advisory firm providing a comprehensive range of accounting and advisory services to clients across various industries. With a team of seasoned professionals and a client-centric approach, SW delivers tailored solutions and strategic advice to help businesses achieve their goals.
Reach out to Simon Tucker or learn more about our startup advisory services here.
Media contact
Australia’s rental crisis is set to be tackled head-on by the Albanese government, which has proposed incentives to boost housing supply through build-to-rent (BTR) developments in the recent Federal Budget.
According to the budget papers, for eligible new BTR projects where construction commences after 9 May 2023, the government will :
- increase the depreciation rate from 2.5 per cent to 4 per cent per year; and
- reduce the withholding tax (WHT) rate for eligible fund payments from managed investment trusts (MIT) to foreign residents on income from eligible BTR properties after 1 July 2024 from 30 to 15 per cent, subject to further consultation on eligibility criteria.
These proposed tax changes address a key contentious issue between the BTR industry and government, being that the current MIT WHT rate hits foreign investors twice what they would pay on other eligible property assets. With the MIT tax rate to drop from 30% to 15% from 1 July 2024, the BTR sector will be aligned with other commercial property sectors (i.e office, retail and industrial) and is likely to boost foreign investment in the BTR sector.
The proposed changes have been welcomed by the Property Council of Australia (PCA) and the Urban Development Institute of Australia (UDIA), both long-time advocates of the industry.
These proposed changes are a welcome first step, although the GST impediments for BTR projects is still to be addressed. We also need to wait for the final legislation to see what is going to be considered a BTR project. Most State governments have already flagged tax concessions for BTR projects (refer below). However, each State has introduced different regimes and have different definitions of BTR.
We would hope that the Federal Government’s BTR definition is the least restrictive, and would ensure that if a BTR project qualifies for State tax BTR concessions, that the project will also be eligible for the 15% MIT Withholding Tax (WHT) rate.
Other considerations
It will also be important to ensure that the BTR project is structured carefully to ensure that the Trust is not a trading trust (making it ineligible to be a MIT). For example, where BTR developments are structured in such a way to meet the definition of commercial residential premises for GST purposes (so that GST credits can be claimed), there is a risk that the operations may be considered a trading trust.
State Tax changes
In addition to the proposed federal tax concessions, there are tax concessions available for BTR developments at the State and Territory level. The most recent State to introduce BTR relief is Western Australia, who introduced new land tax relief for eligible BTR developments on 17 May 2023. We have summarised State and Territory BTR concessions in the table at Appendix A. which we have summarised in the table at Appendix A.
Greenlight for expanding concessional rate for clean building MITs
The Federal Budget has also extended the clean building concessional MIT WHT rate of 10% to data centres and warehouses, where construction commences on and after 9 May 2023. The reduced WHT rate will apply from 1 July 2025.
This measure will also raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia or a 6-star rating under the National Australian Built Environment Rating System.
A MIT will be a clean building MIT where the income is not tainted with income from other assets that are not reasonably incidental. For example, a single MIT cannot hold both a clean building and other non-clean buildings. For MITs that are considering constructing or developing new energy efficient office buildings, shopping centres, hotels, data centres or warehouses, it is important to ensure that you utilise the most appropriate structure to utilise the 10% WHT rate.
How can we help?
If you are considering a BTR development or a clean building MIT, we can assist with determining the appropriate structure and provide advice on relevant tax considerations.
Contributors
Appendix A
| State | Land tax | Duty |
|---|---|---|
| Victoria | For the 2022 land tax year, 50% discount on taxable value of land for eligible BTR developments for up to 30 years.1 Foreign owner land tax surcharge For the 2022 land tax year, full exemption is available for eligible BTR developments for up to 30 years.2 The general absentee owner surcharge exemption may be available during construction period if the BTR developer is Australian-based, makes a significant contribution to Victorian economy and community and exhibits goods corporate behaviour. | Surcharge purchaser duty: general exemption may be available if developer is Australian-based, commercial activities involve significant development adding to the supply of housing stock in Victoria and developer exhibits good corporate behaviour. No discount provided in relation to the general duty rates. |
| New South Wales | Provided construction commenced on or after 1 July 2020, there is a 50% reduction in land value for land used and occupied as a BTR property. Foreign owner land tax surcharge For land tax year commencing 31 December 2020 until land tax year commencing 31 December 2039, there is an exemption from surcharge land tax paid, provided BTR property was constructed on the land and the corporation is entitled to a reduction in land value for land tax purposes.3 | Surcharge purchaser duty: Exemption for surcharge purchaser duty, provided that: the transfer was entered into on or after 1 July 2020, BTR property was constructed on that land, and the corporation is entitled to a reduction in land value for land tax purposes. No discount provided in relation to the general duty rates. |
| Australian Capital Territory | The ACT government is targeting its support to BTR developments where at least 15 per cent of dwellings are treated as affordable rental tenancies.4 The government is offering three initiatives that include financial assistance for BTR affordable rental: Nominated land release sites for BTR affordable rental projects. Inviting proposals for BTR affordable rental on an annual basis. A time-limited Lease Variation Charge discount for community housing managed projects. | |
| Queensland | Land tax: from 1 July 2023, a 50% discount will be available on land tax for up to 20 years.5 Foreign owner land tax surcharge From 1 July 2023, full exemption for the 2% foreign land tax surcharge for up to 20 years. General ex gratia relief may be available during construction period. | Surcharge purchaser duty: From 1 July 2023, a full exemption from the Additional Foreign Acquirer Duty for the future transfer of a BTR site. General ex gratia relief may be available. |
| BTR Pilot Project: a targeted rental subsidy provided by QLD government to the private sector. This initially targeted developments on privately owned land but has expanded to include state-owned sites.6 | ||
| South Australia | Land tax: 2021-22 State Budget announced a 50% reduction in land value from 2022 until 2040. The land tax reduction will be available from the 2022-23 financial year up to, and including, the 2039-40 financial year. More details will be released outlining eligibility criteria and application process once the relevant legislative instrument passes parliament.7 | No specific concessions provided. |
| Western Australia | Land tax: 50% exemption for eligible BTR developments to be available from 1 July 2023 for up to 20 years.8 To access the land tax exemption, BTR developments must: · contain at least 40 self-contained dwellings available for residential leases · be owned by the same owner or group of owners, and be managed by the same management entity and · be completed between 12 May 2022 and 1 July 2032. Retrospective land tax would apply if an eligible BTR development stops meeting the criteria within the first 15 years after the exemption is granted. | No specific concessions provided. |
1 Section 70J, Land Tax Act 2005 (Vic).
2 Section 70K, Land Tax Act 2005 (Vic).
3 Section 5CA, Land Tax Act 1956 (NSW).
4 Build to Rent – Treasury (act.gov.au)
5 Tax concessions to drive investment into affordable housing – Ministerial Media Statements
6 Queensland Build-to-Rent Pilot Project – Queensland Treasury
7 Exemptions, waiver or relief | RevenueSA
8 Media statements – New land tax relief to bolster Western Australia’s rental market
我们的联邦预算快讯大致介绍了本事务所专家就预算案提出的见解以及未来可期的机遇。本事务所也专门针对您所属的行业，就联邦预算案中的各项扶持措施能否达到业界期望，发表了看法。
了解联邦预算案在2023年对您有何意义：
The Australian Government has released draft legislation with changes to Country-by-Country (CbC) reporting for large multinationals that would see previously confidential details made public.
In the October 2022-23 Federal Budget, the Australian Government announced its intention to implement public CbC reporting measures to enhance transparency, and improve comparability and accessibility of tax information.
The Government has now released draft legislation that, if enacted, requires the relevant CbC reporting parent to provide selected tax information relating to its CbC reporting group for public release. The information to be published relates to presence and tax dealings of members of the CbC reporting group across jurisdictions and should enable investors, customers, and regulators to create a picture of how the entity structures its tax affairs in Australia and globally.
The proposed measures would be the first unrestricted mandated public reporting of a broad coverage of worldwide tax related data by jurisdiction.
While some European countries have started to require taxpayers to publish tax information, the level and amount of disclosures required in Australia is out of step. In effect, the proposed measures will bypass Australia’s international obligations under OECD’s BEPS Action 13 which emphasise confidentiality.
Entities covered by the amendments
Entities required to report are those that are classified as a CbC reporting parent, where at least one member of the CbC reporting group is an Australian resident or a foreign resident with an Australian permanent establishment. The obligation will fall on the CbC reporting parent, which will often be a foreign entity.
The Commissioner may in writing exclude specific entities from having to publish tax information of a particular kind.
Information to be published
Much of the required information is the same as that already provided under the existing confidential CbC reporting rules. The additional information that will need to be disclosed includes:
- a description of the CbC reporting group’s approach to tax
- in respect of each jurisdiction in which the CbC reporting group operates, the following information for the income year, at a group level:
- expenses arising from transactions with related parties that are not tax residents of the jurisdiction
- a list of tangible and intangible assets as at the end of the income year, and the book value of those assets
- effective tax rate.
Regulations may prescribe additional information to be disclosed.
The information to be disclosed is generally required to be sourced from audited consolidated financial statements, to ensure that the material is reconcilable and verifiable.
How information needs to be published
Public CbC reporting information will need to be provided to the Commissioner, who will facilitate publication on an Australian Government website.
Any errors identified should be reported to the Commissioner, who will be responsible for making the information available on an Australian Government website (presumably the same one on which the originally lodged data is to be displayed).
Application date
The new disclosure rules are expected to apply to the 2023-24 income year onwards.
The application date for groups with substituted accounting periods (SAPs) is currently unclear. The present legislative wording indicates that the public reporting rules could potentially apply to year of income ending 31 December 2023, with filings required by 31 December 2024. Other parts of the draft materials, however,indicate the rules will apply only to income years commencing on or after 1 July 2023. The effective date for groups with SAPs will need to be clarified during the legislative process.
The timing of annual submissions is the same as for the confidential CbC reporting which is within 12 months of year end.
Penalties for non-compliance
Failure to comply the Public CbC reporting measures will be subject to penalties, determined under the Significant Global Entity (SGE) penalty regime.
Concerns that this reporting obligation brings
Our initial thoughts on the main concerns that this additional reporting obligation brings are detailed below.
- The tax risk management and governance processes in place should clearly outline the CbC reporting group’s approach to tax.
- The reporting will require consideration of the level of confidence that an entity has in the validity and accuracy of data.
- It will be necessary to ensure that tax disclosures for all members of the CbC reporting group are aligned.
- Management and the Board will need to agree the process to be used to extract and collate information, and to review and approve materials prior to submission.
- The public release of the information will allow for more external analysis and questions surrounding where profits are made and where taxes are paid.
- Ultimately this could help to inspire public confidence and support from investors, customers, and regulators, but could also result in reputational risk, in the event that negative inferences are drawn from the materials released.
Releasing the requested information publicly could result in data that would otherwise be considered ‘commercial in confidence’ becoming available to competitors, and cause commercial impacts that may outweigh the benefits of the additional tax transparency. This could result in financial losses, quite apart from the administrative burden anticipated in putting this additional reporting in place, and could potentially drive foreign investors away from Australia.
In addition, the proposed timeframe is far from sufficient for taxpayers to fully understand the implications, communicate/educate foreign jurisdictional parents, and set up necessary reporting systems to meet the onerous compliance reporting requirements.
How SW can help
SW will be monitoring announcements and will keep you updated as more information becomes available.
Our tax experts can assist with:
- determining the impact of the measures on your group
- analysing the additional information (e.g. approach to tax, effective tax rate) in your unique circumstances and advising on how best to prepare for the additional disclosure requirements
- developing a process that can help you manage compliance with the onerous reporting requirement
- communicating with your foreign CbC reporting parent and relevant stakeholders.
Please reach out to the Key Contacts here, or your SW contact, if you would like to know further.