In Tao v Commissioner of State Revenue [2025] VSC 831, the Court held that becoming the sole director and shareholder of a corporate trustee constituted control of the trust itself, exposing the acquirer to landholder duty.

As the first Victorian Supreme Court decision to interpret section 82, the case highlights the provision’s broad reach and serves as a warning that even administrative changes can carry significant tax consequences.

Background of the VCAT decision

The WCT Unit Trust owned a Victorian development property valued at over $1m, making it a landholder under the Duties Act. Its corporate trustee was 66 William Road Pty Ltd. The trust units were held as follows:

• 50 units by Maclaw No. 547 Pty Ltd, as trustee for the Mountain Highway Unit Trust.
• 25 units by Fredco Incorporated Limited, as trustee for Nomsec No. 1 Limited.
• 25 units by Amber Investments Pty Ltd, in which Mr Tao was a majority shareholder.

In 2014, Mr Tao bought four shares in the trustee company 66 William Road Pty Ltd, becoming its sole shareholder. By March of that year, he had also appointed himself as the company’s sole director and secretary. More than five years later, the Commissioner issued a notice assessing duty of roughly $199,650, plus penalties and interest.

The Commissioner’s assessment treated Mr Tao’s assumption of control of the trustee as a ‘relevant acquisition’ of the WCT Unit Trust under section 82 of the Duties Act. The assessment was based solely on his control of the trustee company, even though neither Mr Tao nor Amber Investments Pty Ltd had acquired any additional units in the WCT Unit Trust.

Legal issues

Landholder duty is imposed when a person makes a ‘relevant acquisition’ of an interest in a landholding entity, such as a company or unit trust owning Victorian land worth $1m or more. Typically, this covers acquisitions of significant shareholdings or unit holdings. Section 82, however, is a broad provision that extends to changes in control that do not involve the direct acquisition of an interest.

In essence, section 82(1) provides that if a person ‘acquires control’ of a private landholder by means other than a direct acquisition of an interest, they are deemed to have made a relevant acquisition of 100% of the landholder, or a lesser percentage as determined by the Commissioner.

Section 82(2) defines ‘acquiring control’ as obtaining the capacity to determine or influence the outcome of the landholder’s financial and operating decisions. It makes clear that practical influence, beyond strict legal rights, and the parties’ conduct and behaviour must be considered in assessing control. This broad definition means a person can control a landholding entity without owning it, provided they effectively determine or influence key decisions.

The Supreme Court decision

Mr Tao challenged the Victorian Civil and Administrative Tribunal (VCAT) decision in the Supreme Court of Victoria, seeking leave to appeal.

One ground of appeal was that VCAT failed to treat section 82 as a two-stage test: first, determining whether control has been acquired; and second, if so, exercising the Commissioner’s discretion to deem the acquisition to be less than a 100%. The Court rejected this argument, finding that the VCAT had, in fact, identified Mr Tao’s acquisition of practical control of the WCT Unit Trust through his appointment as sole director and shareholder of the trustee company, and then considered whether to reduce the default 100% deemed acquisition.

VCAT reduced the deemed acquisition to 85% to reflect Mr Tao’s existing indirect interest held by Amber Investments Pty Ltd.

Mr Tao also argued that section 82 should be construed narrowly as an anti-avoidance provision, and that VCAT had misunderstood the purpose of the discretion in paragraph (b). Mr Tao contended that the discretion was intended to reflect the degree to which an effective beneficial interest had been acquired. The Court disagreed, confirming that section 82 is a distinct head of duty, not merely an anti-avoidance mechanism, and that it allows the Commissioner to deem a person to have acquired up to 100% of a landholder simply by acquiring control.

It was held that the discretion under section 82(1)(b) is directed at adjusting the default 100% acquisition where a taxpayer already holds an economic interest, as was the case with Mr Tao. VCAT’s decision to reduce the deemed acquisition to 85% was therefore a lawful and appropriate exercise of that discretion.

Mr Tao further contended that VCAT had ignored numerous factual matters, including the absence of any change in beneficial ownership and the rights of other unit holders. The Court held that these considerations were either raised for the first time on appeal or were irrelevant to the control test and that section 82 focuses on practical control rather than beneficial ownership. Therefore, arguments based on the distinction between legal and equitable interests, or the absence of share transfers, did not undermine the finding that Mr Tao had acquired control.

The Court found that VCAT had considered all factual matters put before it and had properly applied the discretion to reduce the deemed acquisition. As a result, the Court concluded there was no error of law and refused leave to appeal.

Key takeaways

• Taking control of a corporate trustee or landholding company, for example by becoming its sole director, can trigger landholder duty even if no trust units or shares change hands. Any restructure that concentrates decision-making power should be reviewed for duty implications.

• The Court observed that the ability to ‘influence’ may be something less than 50% control. The State Revenue Office website states that:

[Section 82] “can also apply to a person who is appointed to the board of directors of a landholder (or the corporate trustee of a landholder). Provided the shareholders or unit holders have not made arrangements that allow the director to benefit, or exercise rights which confer benefits similar to holding an interest in the landholder, the Commissioner will take the view that the director has not acquired control (and made a relevant acquisition of an interest of 100%) as a result of such an appointment.”

• In the Supreme Court, the Commissioner argued that this statement was intended to apply only to multi-director companies, including trustee companies, and not to companies with a sole director. However, given the Supreme Courts observation that ‘influence’ may arise with less than 50% control, the appointment of a director to a multi-director company could also, in some circumstances, trigger section 82.

• Section 82 is broad. The duty is not confined to anti-avoidance scenarios but operates as a standalone head of duty even where there is no relevant acquisition in the landholder. Consequently, acquisitions that are exempt under section 89D, such as the appointment of receivers, liquidators, executors or administrators, may nevertheless be liable for duty as an acquisition of control.

• The Commissioner’s discretion is limited. It is primarily directed at preventing double taxation of an existing economic interest, rather than operating as a general waiver of liability.

How SW can help

Navigating the nuances of landholder duty and trust structures can be complex. SW’s state taxes team is closely monitoring these developments. If you are contemplating changes to a trust’s structure or a corporate trustee, or if you suspect past changes may have inadvertently triggered a duty exposure, our team can help review your situation and manage any landholder duty risks.

Contributor

Robert Parker

Blake Trad

The post Supreme Court confirms landholder duty on appointment of director appeared first on SW Accountants & Advisors.

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. 

Contributors

William Zhang

Blake Trad 

Robert Parker

The post Oliver Hume Case update | State Revenue Office emboldened to review past capital raises for property trusts under an IM  appeared first on SW Accountants & Advisors.

The Victorian Court of Appeal recently handed down its unanimous decision in Oliver Hume Property Funds v Commissioner of State Revenue [2024] VSCA 175. The Court determined that the acquisition of 99.99% of the issued shares in a landholder by investors was based on a widely distributed information memorandum (IM), which constituted substantially one arrangement. The Commissioner’s assessment of landholder duty was subsequently upheld.

Key Takeaways

• The appeal emphasises that capital raising in entities that have land holdings require appropriate duty advice to prevent adverse and unintended duty consequences
• It is equally important that consideration is given to the drafting of the transaction and fund raising documents to prevent the rise of unintended duty outcomes.  
• The decision reinforces that determining whether the ‘associated transaction’ rules apply will depend on the particular facts and circumstances of each case.
• It’s uncertain whether the State Revenue Office (SRO) will continue to apply the administrative practice expressed in DA.057 which provides that the Commissioner would not view a genuine public offer under a product disclosure statement (PDS) as an associated transaction.  In the original decision, the court held that the Commissioner’s concession in the ruling has no force in law. The SRO has yet to comment on the Appeal decision and its impact on their current ruling and administration of these provisions.
• Many other states have similar (but not identical) concepts as “associated transaction”. Thus, this issue must be considered carefully for all States, not just Victoria.
• It remains unclear at this stage whether there will be a further appeal.
• We call upon the Victorian Government to amend the legislation to ensure that genuine public offers under a PDS or an Information Memorandum are not considered associated transactions. The Victorian property industry is being crippled by red tape and taxation. This exemplifies poorly drafted legislation that has unintended consequences that must be fixed.

Case background

For details of the factual background, please refer to our previous article.

Under the landholder duty provisions of the Duties Act 2000(vic), a person makes a relevant acquisition if:

The person acquires an interest in a landholder:

• that is of itself a significant interest in the landholder or
• that amounts to a ‘significant interest’ in the landholder when aggregated with other interests in the landholder acquired by all or any of the following:
  • the person
  • an associated person
  • any other person in an ‘associated transaction’

Landholder duty is payable on a relevant acquisition.  The case concerns what constitutes an ‘associated transaction’.  

Oliver Hume sought leave to appeal against VCAT’s decision, which upheld the Commissioner’s assessments on a question of law. Leave to appeal was sought on the following grounds:

1. VCAT erred in considering that each investor is bounded by the statutory contract constituted by the applicant’s constitution.
2. VCAT erred in considering that the investors and the applicant shared the common objective of having the shareholders as members and as providers of equity.
3. VCAT erred in the interpretation of s 78(1) in that the definition of ‘associated transaction’ was satisfied even though the investors subscribed for their shares independently of one another.
4. VCAT should have found that the share acquisitions were not “associated transactions” because the investors had no connection beyond wanting equity in the applicant. Each investor applied separately and independently for shares under the applicant’s IM.

We have listed Oliver Hume and the Commissioner’s submissions in Appendix A below.

The Court’s Decision

The court asserted that although the arguments put forward by Oliver Hume had merit, the appeal was dismissed due to several interconnecting factors which demonstrated a ‘oneness’ suggesting an associated transaction. The factors included:

• The acquisitions were interconnected because no individual acquisition could go ahead under the terms of the IM unless the required $1.8 million was raised.
• The acquisitions could not be described as independent of each other notwithstanding the fact that each investor may not have met or even communicated with the others.
• The investors bound themselves to the constitution, joining a single land development project with an entrenched management structure.
• The acquisitions occurring on the same day and in the same way to transform the shareholding in the landholder from being 100% owned by Oliver Hume to 99.99% owned by private investors.

The court’s decision was based on the particular facts and circumstances of the case. However, the factors above are not dissimilar to many other capital raising arrangements.

How SW can help

Should you have any questions on what this decision means for you and your business, please reach out to your SW contact. We recommend that duty advice is sought before undertaking any capital raising for property acquisitions.  

Contributors

William Zhang

Blake Trad

Eric Lay

The post Oliver Hume appeal decision appeared first on SW Accountants & Advisors.

1. Corporate reconstruction and consolidation exemption concession amended to a 90% concession

The 100% duty exemption currently in place for eligible corporate reconstruction and consolidation transactions will be replaced with a concession requiring only 10% of the duty that would otherwise be payable to be paid.

Under the proposed transitional rules, the rules currently in force (i.e. a 100% exemption) are still expected to apply to:

• transactions occurring before 1 February 2024, or
• a transaction occurring on or after 1 February 2024 if an application for the exemption is made on or before 1 April 2024 and the transaction arose from an agreement or arrangement entered into before 19 September 2023.

2. Landholder amendments

a. Landholder acquisition thresholds for private unit trust schemes

The threshold for the acquisition of a significant interest in a private unit trust that is a landholder will be reduced from 50% to 20% for acquisitions in private unit trusts after 1 February 2024 (unless it relates to an acquisition from an agreement or arrangement entered into before 19 September 2023).  

However, the 50% threshold will remain for acquisitions in:

• private companies
• unit trust schemes which are registered with Revenue NSW as a wholesale unit trust or imminent wholesale unit trust. These are a new category of unit trust (see below).

The 90% acquisition threshold for ‘public landholders’ (i.e., certain listed companies, certain listed unit trusts and widely held unit trust schemes) remains unchanged.

b. Landholder acquisition thresholds for wholesale unit trust scheme and proposed wholesale unit trust scheme registration

A separate regime is intended to be introduced for wholesale unit trusts. Under the proposed amendments, the Chief Commissioner may register wholesale unit trust schemes, which is expected to have the effect of preserving the 50% acquisition threshold for these entities.

The Chief Commissioner may register a private unit trust scheme as a wholesale unit trust scheme if satisfied that:

• it was not established for a particular investor
• at least 80% of its units are held by ‘qualified investors’ (including listed companies and trusts, public superannuation funds and other wholesale unit trust schemes)
• no qualified investor (alone or in aggregate with associated persons) holds 50% or more of its units
• any other requirements specified by the Chief Commissioner to be published in a gazette (not yet published). Note, the Victorian registration requirements are not similarly open ended.

The Chief Commissioner may register the private unit trust scheme as an “imminent wholesale unit trust scheme” if satisfied it will meet the abovementioned criteria within 12 months of the first issue of units to a “qualified investor”.

The Chief Commissioner may also cancel the registration if satisfied of any disqualifying circumstances, such as a failure to comply with a condition of registration. This may result in any historical acquisitions in the unit trust scheme as being assessable.

Acquisitions in a trust are taken to be acquisitions in a registered wholesale unit trust scheme or an imminent wholesale unit trust scheme if:

• the acquisition occurs on or after 1 February 2024, and
• an application is made to register the scheme before 1 May 2024, and is subsequently approved.

c. Changes to tracing / linked entity rules

The threshold for tracing property through linked entities of a landholder will also be reduced from 50% to 20%, similar to Victoria and Northern Territory.

The changes to the above landholder duty provisions will apply to acquisitions that are completed on or after 1 February 2024 unless they arose from an agreement or arrangement entered before 19 September 2023.

This change is significant as many more entities will be treated as landholders e.g. a company holding a 25% interest in a landholding company or trust. Transactions involving upstream entities will need to be carefully managed.

3. Increase in fixed and nominal duty amounts

The fixed and nominal duty amounts for various transactions under the Duties Act 1997 (NSW) will be increased. For example, this includes increases in the nominal duty:

• on a declaration of trust over unidentified property signed in NSW (or electronically by a trustee based in NSW) from $500 to $750
• on transfers occurring in conformity with an agreement upon which duty has been paid, from $10 to $20
• on certain concessions, including change of trustee concession from $50 to $100, or certain managed investment scheme concessions from $50 to $500. 

These changes will apply to most transactions occurring on or after 1 February 2024, regardless of whether they arise under an arrangement entered into before this date.  The exception being that nominal duty for transfers of land under agreements entered into before 1 February 2024 will remain at $10.  

4. End to the duty exemption for certain zero and low emission vehicles

The exemption from motor vehicle registration duty ceases to be available to zero and low emission vehicles from 1 January 2024.  The transitional provisions allow battery electric vehicles and hydrogen fuel cell electric vehicles purchased (or for which a deposit was paid) before 1 January 2024 but that had not yet been registered by that date to continue to access the exemption.

5. Other minor amendments

• revise the land tax indexation formula to ensure that the NSW Valuer General can determine the correct land tax threshold for the 2024 land tax year
• require that a person occupying a property as their principal place of residence must own at least a 25 per cent interest in the property to be eligible for the land tax exemption. The transitional provision provides that those who already claim the principal place of residence exemption but own less than 25% may continue to claim the exemption for the 2024 and 2025 land tax years. The minimum ownership requirement will then apply to those owners from the 2026 land tax year
• re-enact a power of the Chief Commissioner to remit interest and include a new power for the Chief Commissioner to issue guidelines about how interest must be remitted.

How SW can help?

Reach out to our state taxes experts if you would like to discuss further.

Contributors

Robert Parker

Wasi Hussain

The post NSW Budget 2023-24: Major changes to the NSW duty appeared first on SW Accountants & Advisors.

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: 

1. in order for shares to be issued to investors, a minimum subscription needed to have been met 
2. 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

Robert Parker

The post Victorian capital raising | Risk of landholder duty and the Oliver Hume case appeared first on SW Accountants & Advisors.