The recent Supreme Court of Victoria decision of Razzy Australia Pty Ltd & Anor v Commissioner of State Revenue [2021] VSC 124 is a seminal decision as it provides much sought clarification on the application of various aspects of Chapter 3 of the Duties Act 2000 (Vic) (Act) which deals with landholder duty, as well as section 40 of the Act which deals with an exemption for the transfer of property from one superannuation fund to another.

Due to the significance of this decision as to the application of several central aspects of the Act, the Court’s decision will be examined in a three-part series comprising of the following focussed topics:

• Part 1:  Aggregation of interests in a landholder includes exempt transfers

• Part 2:  Section 40 exemption – Application to redemptions as well as transfers

• Part 3: Section 40 exemption – What constitutes transfers in connection with ceasing to be a member of a complying superannuation fund?

Facts

A settlement deed was entered into between members of three self-managed superannuation funds and entities connected with them, which, amongst other things, restructured the three super funds of which the members were the only members.

The settlement deed had the effect of parties rearranging their superannuation funds in a way that resulted in one member controlling and being the sole member of one fund, and the other member controlling and being the sole member of the other two funds.

As a result of this restructure, units in ‘private unit trust’ schemes (which were ‘landholders’ as defined in section 71(1) of the Act) were redeemed and transferred between the super funds and to a related trust.

Relevantly, they included a transaction in which a super fund increased its interest in a unit trust by 10.25% and the related trust increased its interest in the unit trust by 12.09%. The super fund increase was ultimately found to be exempt (as discussed in parts 2 and 3 of this series). The related trust’s acquisition, in isolation, was below the 20% threshold for triggering landholder duty but would be dutiable if that acquisition was aggregated with the super fund’s exempt acquisition.

Aggregation of interests in a landholder includes exempt transfers

The Supreme Court found that the aggregation of the two separate acquisitions constituted an ‘associated transaction’. As a result, the transactions were aggregated and the 20% threshold was exceeded. Therefore, a ‘significant interest’ was acquired and landholder duty was triggered on the related trust’s 12.09% acquisition.

It was held that any changes in equitable ownership ‘however achieved’ are calculated for the purposes of the aggregation provisions. Therefore, exempt acquisitions are counted for determination whether a significant interest is acquired, even though the exempt acquisitions are themselves not dutiable.

This finding means that taxpayers must be extra diligent when determining whether the transactions are aggregated for the landholder duty regime, including where exempt transactions are or have been involved.

To discuss or for further 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 0178 | T +61 401 387 451
E tabraham@sladen.com.au