In this part 2 of our series on the decision of Razzy Australia Pty Ltd & Anor v Commissioner of State Revenue [2021] VSC 124 we look at whether the exemption in section 40 of the Duties Act 2000 (Vic) (Act) includes transactions other than transfers. Part 1 of our series examined whether exempt transfers are aggregated for landholder duty. Part 3 of our series considers what is ‘in connection with’ ceasing to be a member of a super fund for the section 40 duty exemption?

Section 40 exemption – Application to redemptions as well as transfers

As part of the restructure described in part 1 of our series, redemptions of units in the private unit trust schemes occurred to effect the transfer of member interests between super funds.

The Commissioner contended that notional transfers (in this case redemptions of units) did not satisfy the requirement in section 40 (1)(a) of the Act and, therefore, the increase in unit holding percentages as a result did not qualify for the exemption under sections 89D(a) and 40 (for transfers between super funds).

The Court rejected the Commissioner’s arguments which impermissibly sought to dissect what took place in the settlement deed into separate parts, which was an argument of form over substance that ignored section 89D(a) of the Act.

The Court held that in the context of section 89D(a) which provides an exemption irrespective of the ‘means by which’ the interest was acquired, ‘transfer’ in section 89D(a) includes notional transfers, which therefore includes redemptions.

While the application of the section 40 exemption to redemptions of units is not likely to be relevant for many taxpayers, the principle that duty exemptions have a broader application than to transactions that involve transfers of land is an important finding that will have a broader relevance in dutiable matters.

To discuss further or for more information, please contact:

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au

Thomas Abraham
Senior Assoicate
M +61 3 9611 0139 | T +61 438 401 853
E tabraham@sladen.com.au