The New South Wales Supreme Court has held that a water pipeline was subject to duty as “goods” for the purpose of the New South Wales landholder duty provisions, which illustrates the importance of distinguishing between land holdings and goods.

What’s happened?

On 24 May 2024 the New South Wales Supreme Court held that landholder duty applied to value of a water carrying pipeline in Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue (2024] NSWSC 628.

In particular, while the pipeline was not ‘land’ for the purposes of the Duties Act 1997 (NSW) (the Duties Act) due to statutory severance, it was goods and therefore remained subject to duty as the there was more than $2 million of other land assets.

This case arose before a deeming provision was introduced – so the position may be different going forward.

Legislation

The Duties Act imposes landholder duty on the acquisition of certain interests in companies or unit trusts with direct or indirect land assets above the $2 million land asset value threshold.  If duty applies, it applies to the value of both land holdings and goods of the landholder in New South Wales.

On 24 June 2020, a new section 147A was introduced to the Duties Act that deems that land includes anything fixed to the land whether or not the thing constitutes a fixture at law, or owned separately from the land or is notionally severed or considered to be legally separate from the land as a result of the operation of any other Act or law.

In this case, the acquisition took place in 2019, prior to the introduction of new section 147A and so the old rules applied.

Background Facts

SGSP Rosehill Network Pty Ltd (the Company) owned land with an underground pipeline constructed to supply recycled water to south-west Sydney.

The pipeline was connected to a recycled water plant in Fairfield.

The Company held a network operator’s license under the Water Industry Competition Act 2006 (NSW).

On 30 September 2019, Conexa Sydney Holdings Pty Ltd acquired 100% of the shares in the Company.

On 21 March 2022, the Chief Commissioner assessed Conexa Sydney Holdings Pty Ltd to primary landholder duty of $3,326,497 – on the basis that the total value of the land and goods of the Company at the time of the acquisition was $60,749,000.

Decision

There were two main issues:

1. Was the pipeline a land asset for the purposes of the landholder duty provisions?

2. If it was not a land asset, was it in any case goods of the Company?

Despite finding that the pipeline was not land or an interest in land due to statutory severance, Richmond J did find that the pipeline remained an interest in goods.  The share acquisition therefore attracted landholder duty as there were sufficient other land assets to mean that the Company was above the $2 million land value threshold.

Key Observations

The position would have been different if the pipeline was the only asset of the Company, as landholder duty would not apply.

Richmond J started his analysis with section 64 of the Water Industry Competition Act 2006 (NSW). 

This provides that water industry infrastructure is owned by the person that constructs or installs it, whether or not the land in, on, under or over which it is situated is owned by that person.

Richmond J held that this section has the effect of causing the water industry infrastructure to retain their character as chattels despite their affixation to land.

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Please contact us with assistance with advice on landholder duty or any other State Tax issues.

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

Meera Pillai
Associate
T +61 3 9611 0179
E mpillai@sladen.com.au