The State Taxation Acts Amendment Bill 2019 was introduced into the Victorian Parliament this week and was passed by the Lower House. Importantly for property developers, the Bill contains changes that will significantly broaden the scope of the ‘economic entitlement’ provisions of the Victorian Duties Act 2000 meaning that many property development arrangements that are not subject to duty under the current laws, will be caught.
Under the current regime, a liability for duty will arise for a developer, where:
- the developer enters into an arrangement with a private company or unit trust which owns land in Victoria worth more than $1m; and
- the developer has the right to participate in the dividends or income of the land owner, or the income, rents or profits derived from the land, or the capital growth of the land, or the proceeds of sale of the land,
but importantly the provisions only apply if the developer’s interest amounts to 50% or more.
If the Bill is passed, the provisions will apply to land owned by individuals as well as companies and trusts and the 50% interest threshold will be largely removed.
Watch this space for updates on the progress of the Bill.
Any proposed property development requires careful planning and professional advice to avoid unexpected liability for duty including under the current regime and tax.
If you think you may be impacted by the economic entitlement provisions, or have any other concerns about your property development arrangement, please contact a member of our corporate and commercial team.