• Home
  • /
  • Property update: Stamp Duty changes — land rich regime changed and expanded

Property update: Stamp Duty changes — land rich regime changed and expanded

Aug 9, 2012

Developers and investors may now be paying more duty

The Victorian Government has recently announced changes to the Duties Act 2000 which has resulted in change and expansion of the land rich regime — now called ‘landholding’.


Developers who use Property Development Agreements and individuals who invest in entities with a substantial amount of Victorian real estate holding will be affected most by the new changes.

The new regime, known as ‘landholding’ instead of ‘land rich’ was introduced on 1 July 2012. It significantly increases the range of transactions and entities that incur duty.

Land Rich Provisions were introduced into the Duties Act to make sure that acquisition of significant interests in land rich entities incurred duty. This regime was introduced to prevent avoidance of duty when individuals purchased shares in an entity that owned land, rather than buy the land themselves — thereby avoiding payment of stamp duty.

Important changes

Listed below are some of the important changes to the Act.

1. Additional taxable landholding entities

The old land rich regime only applied to unlisted companies, non-widely held trusts and wholesale unit trusts as being taxable landholding entities.

The new ‘landholder’ amendments widen the scope to include listed companies, listed unit trusts and widely held trusts.

2. Removal of land rich ratio

The old regime required the entity to have:

  • $ 1 million of land in Victoria;
  • greater than 60% of its assets to be land assets.

The amendments have removed the ratio requirements (land rich) and now only require the entity to hold $1 million of assets in Victorian land (landholding), widening the scope of entities caught.

It is interesting to note that the $1 million entry level into the landholding regime was introduced many years ago at a time when a landholding of $1 million was considered to be a very substantial holding.

The government has not sought to change the entry level amount and, accordingly through the passage of time, the regime now probably affects the vast majority of real estate holding entities because today it is not unusual for real estate holdings to have a value of $1 million or more.

3. Dutiable acquisitions

A relevant acquisition is an investment in a landholding entity of at least a 20% interest in a private unit trusts and a 50% interest in a private company.

Relevant acquisitions will incur duty at the standard land stamp duty rates 

The new regime also includes investments leading to an interest of 90% or greater in a landholding for listed companies and public unit trusts.

Duty will be incurred at the concessional rate of 10% of the standard duty rate.

4. Inclusion of economic entitlement as a relevant acquisition

The new regime broadens the type of interests caught by the provisions by including the concept of an economic entitlement as being a relevant acquisition.

Economic entitlements in a landholding entity include any of the following:

  • dividends or income of the landholder;
  • income rents or profits of the landholder;
  • capital growth of the landholder;
  • proceeds of sale of the landholder.

If the entitlements amount to an interest greater than 50% of the landholding entity, they will be deemed to be a relevant acquisition and incur duty at the standard land stamp duty rates.

Our advice

Development Agreements are commonly used when a developer provides its experience in land development and the landholder provides the land (in return for a split of the profits).

The new regime means that developers who enter into Development Agreements may now be liable for stamp duty and, in some cases, the amount of stamp duty payable may be difficult to quantify at the outset of a project.

It may, therefore, be necessary to seek a private ruling from the Commissioner of State Revenue to determine the amount of stamp duty payable. This will invariably add costs and time delays to most projects.

The new regime also means that investment in entities with Victorian landholdings valued at greater than $1 million may be liable for stamp duty even if real estate is only a minor part of the entity’s assets.

More information

For further information relating to the new landholding regime and how these amendments may affect you, please contact a member of our Property team on (03) 8600 8888.

Note: This update is a guide only and is not intended to constitute legal advice.