As set out in the recent controversial Victorian Budget article, the State Taxation Acts Amendment Bill 2019 (Vic) contains amendments to the corporate reconstruction exemption.
The amending bill has now been passed. This will mean that transactions that form part of a genuine corporate reconstruction or consolidation will no longer be fully exempt from duty.
Instead, such transactions occurring on or after 1 July 2019 will now receive a 90% duty concession (i.e. duty is charged on 10% of the value of the property), with the provisions allowing for no further duty to be imposed on eligible multi step transactions in relation to the same dutiable property that are completed within 30 days.
This measure is disappointing as they will no doubt result in taxpayers abandoning or reconsidering intra-group transactions on the basis of triggering duty – therefore creating an impost on reorganisations or resulting in corporate groups maintaining sub-optimal structures.
On a positive side, it is also proposed to widen the eligibility criteria for the concession, including:
The expanding of the definition of an ‘eligible transaction’ to include dutiable lease arrangements and an application to transfer a motor vehicle registration.
The removal of the requirement for the transferor and transferee to remain part of the same corporate group for 3 years post the transaction (post association requirement).
The removal of the restriction of the corporate consolidation exemption from applying only to newly created income tax consolidated groups and expanding the availability of the concession to apply to interposition of head companies to existing consolidated groups.
Given that the new changes to the corporate reconstruction exemption are due to apply from 1 July 2019, taxpayers currently contemplating a corporate reconstruction or consolidation under the current rules, should consider implementing and finalising any such transactions by 30 June 2019.
Post 1 July 2019, these amendments should be considered carefully in light of any contemplated transactions that are part of a genuine corporate reconstruction or consolidation.
If you have any questions, please contact one of the members of our specialist team: