Oliver Hume Case update | State Revenue Office emboldened to review past capital raises for property trusts under an IM
21/10/2024
The Victorian Court of Appeal’s recent decision in Oliver Hume Property Funds v Commissioner of State Revenue [2024] VSCA 175 prompted the State Revenue Office (SRO) to update its ruling (DA-075v2) and introduce a voluntary disclosure amnesty for taxpayers impacted by landholder duty principles from the case. Importantly, once the amnesty ends on 31 March 2025 the SRO has announced that they will commence compliance activities reviewing past capital raisings.
Updated Landholder duty ‘associate transaction’ ruling
Newly updated Revenue Ruling DA-057v2 replaces the former DA-057 which provided taxpayers with the Commissioner’s view on the meaning of ‘associated transaction’ in the Victorian landholder duty provisions. The updated ruling reflects the Court of Appeal’s decision in Oliver Hume and has other minor amendments.
To recap, the Victorian Court of Appeal in Oliver Hume upheld the VCAT decision which found that the share acquisitions by 18 independent investors under a widely distributed Information Memorandum (IM) were subject to landholder duty as an associated transaction. For further details on the case, please refer to our previous alerts here.
The updated ruling stated that when considering whether an ‘associated transaction’ was made, the focus is on the relationship between the acquisitions and not the parties involved in the acquisitions. Thus, the relationship of the people in a share or unit issue should not be the deciding factor when assessing the existence of an associated transaction. Instead, the focus should be on the circumstances surrounding the share or unit acquisition and whether the relevant agreements and the parties’ conducts infer a unity or oneness between the acquisitions. The Commissioner makes it clear that interests acquired by independent members of the public under a genuine public offer may constitute an associated transaction.
The updated ruling also qualified the Commissioner’s previous statements that he would not impose the associated transaction provisions in circumstances concerning genuine public offers made under a product disclosure statement or prospectus lodged with Australian Securities and Investments Commission (ASIC). This is now limited to circumstances where the public offer results in a conversion to a public unit trust or listed company and the transaction is subject to duty under sections 89B or 89C.
Voluntary Disclosure Regime (‘VD’)
Emboldened by the Court of Appeal decision, the Commissioner has set up a VD regime to encourage taxpayers to self-report the potential landholder duty liability that they might have taken an alternative position on prior to Oliver Hume.
The VD amnesty program will run until 31 March 2025, with compliance activities commencing after this date. For VDs made before 31 March 2025:
- all penalty tax will be remitted and
- interest will only be imposed at the market and reduced 3% premium rates
After this period, the Commissioner will commence a compliance program on capital raisings in landholders and impose penalties and interest on any landholder duty assessments identified.
How SW can help
The Victorian landholder duty landscape has changed significantly following Oliver Hume. The Commissioner’s updated ruling further tightens the scope for arguments against the imposition of landholder duty. Property funds and landholding entities looking to raise capital through a public raising process should pay close attention to the potential duty implications. Receiving the appropriate landholder duty advice before such transactions (before entering the contract to purchase the property) is critical to ensure that double duty does not arise.
Property trusts that have had past capital raises should also review the transactions with their duty advisors to assess whether a voluntary disclosure should be made to take advantage of the amnesty program before the commencement of any SRO investigations.
At SW, our stamp duty experts can assist you in assessing any past transactions and advise you on future transactions to achieve the most effective duty outcome.
Please contact our state taxes team if you would like to discuss possible duty liabilities arising from capital raising participation.
