Landholder Duty without acquiring shares or units? Takeaways from Tao v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 637

The landholder duty provisions of the Duties Act 2000 (Vic) (Act) provide that duty is assessable at general rates when a relevant acquisition (such as shares and units) is acquired in a landholder that has land holdings in Victoria of $1 million or more.

A relevant acquisition is an acquisition of a significant interest in the landholder and a significant interest is defined as:

• in respect of a private unit trust scheme – an interest of 20% or more;
• in respect of a private company or wholesale unit trust scheme – an interest of 50% or more; and
• in respect of listed company or public unit trust scheme – an interest of 90% or more.

In addition to the above thresholds, section 82 provides that a person makes a relevant acquisition of 100% if they acquire the capacity or ability to determine or influence the outcome of the landholder’s financial and operating decisions.

The ‘acquisition of control’ provisions are extremely broad and were successfully applied by the Commissioner of State Revenue Office in Tao.

Tao v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 637:

The facts in Tao are as follows:

• 66 William Road Pty Ltd (Trustee) was the trustee of the WCT Unit Trust (Unit Trust) which was formed for property development purposes.
• the Trustee in its capacity of the Unit Trust owned development property in Victoria with value exceeding $1 million.
• Mr Tao through Amber Investments Pty Ltd, a company of which he was the majority shareholder owned 25% of the units in the Unit Trust.
• The sole shareholder and director of the Trustee was a Mr Constantinou, who through a related entity owned 50% of the units in the Unit Trust.
• Due to a number of reasons including financial difficulties facing the Unit Trust, Mr Tao replaced Mr Constaninou as the sole shareholder and sole director of the Trustee. However, no changes to Mr Tao’s unitholdings occurred.
• The Commissioner of State Revenue issued an assessment of almost $200,000 (plus penalties of almost $50,000 and interest) in respect of Mr Tao’s appointment as the sole director and secretary of the Trustee.

VCAT’s Decision

VCAT agreed with the State Revenue Office that Mr Tao acquired control of the Unit Trust when he acquired the shares in and became director of the Trustee – thus the ability to influence its financial and operating decisions.

Accordingly, and whilst Mr Tao’s beneficial interest in the property remained (his unit holdings and his rights as a unit holder did not change) duty was applicable to Mr Tao’s acquisition of the shares in the Trustee, on the basis that he acquired control of the Unit Trust for the purposes of section 82 of the Act. Unfortunately for the taxpayer, arguments that such circumstances were beyond the scope (or intention) of the landholder duty rules did not change that outcome.

While the SRO’s assessments were based on an acquisition of 100%, the Commissioner has a discretion to reduce that percentage. The Commissioner refused to exercise that discretion and VCAT stood in the shoes of the Commissioner to reduce this percentage down to 75% (on the basis that Mr Tao, through Amber Investments Pty Ltd, already had a 25% interest in the Unit Trust).

Key Takeaways

The landholder duty provisions under the Act are broad and any entity owning land in Victoria over $1 million should obtain professional advice before undertaking any proposed changes. The decision in Tao demonstrates that those changes could be as minor as changes to the shareholdings and directorship of a trustee entity, and that failure to do so can result in costly consequences.

‍This article in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.