Victorian Landholder Duty – acquisitions in a previously public unit trust found to be subsequently dutiable – ISPT v CSR
A new Victorian Supreme Court case ISPT Pty Ltd as trustee for ISPT Retail Australia Property Trust v Commissioner of State Revenue [2026] VSC 480 has considered the landholder duty consequences where an acquisition of a 75.8% interest in a public unit trust schemes were initially not subject to duty, but became dutiable when combined with a subsequent 19.46% acquisition. The first acquisition had caused the funds to cease to be public unit trust schemes.
Landholder duty position
Landholder duty is payable on acquisitions of significant interests of units in landholding unit trusts or shares in landholding companies (where the land value is above $1 million in Victoria). A significant interest is 20% for private unit trusts, 50% for private companies and 90% for public unit trusts and public companies.
If duty is payable, it is payable on a proportionate value of the underling land assets of the landholding entity at rates up to 6.5%.
The Fund
The Fort Street Real Estate Capital Fund (the Fund) consisted of three stapled unit trusts which held interests in Victorian land. The decision was silent on whether all three unit trusts were landholders for Victorian duty purposes and appeared (in our view incorrectly) to treat the stapling as creating a single landholder for landholder duty purposes.
The appellant (ISPT Pty Ltd as trustee for ISPT Retail Australia Property Trust) acquired 75.8% of the units on issue in the Fund in February 2022.
The appellant then acquired a further 19.46% of the units on issue in the Fund in July 2022.
The Commissioner then assessed the appellant to landholder duty on the combined 95.26% interest.
Widely Held Unit Trust
The Fund was a “public unit trust scheme” for the purposes of section 3 of the Duties Act 2000 (Vic) (the Duties Act) as it was a “widely held trust” with 300 or more registered unitholders and none of the registered unitholders (individually or with associated persons, holding more than 20% of the units in the scheme).
As a public unit trust scheme, acquisitions of 90% or more were subject to duty (see section 79 definition of “significant interest”).
Section 78
Section 78 of the Duties Act 2000 (Vic) relevantly provides:
78 What is a relevant acquisition?
(1) For the purposes of this Part, a person makes a relevant acquisition if—
(a) the person acquires an interest in a landholder—
(i) that is of itself a significant interest in the landholder; or
(ii) that amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by all or any of the following—
(A) the person; or
(B) an associated person; or
(C) any other person in an associated transaction; or
(b) after an interest referred to in paragraph (a) was acquired, the person referred to in paragraph (a) or an associated person or any other person whose interest was aggregated with the interest under paragraph (a)(ii), acquires a further interest in the landholder ...
The first acquisition
This was less than a significant interest of 90% and therefore was not subject to landholder duty at the time of acquisition.
However, it did mean that the unit trusts making up the Fund were no longer public unit trust schemes as the appellant was the registered unitholder of more than 20% of the units on issue.
The Supreme Court confirmed that the 90% threshold applied for the initial acquisition of units and that the test for Victoria (unlike, for example, Queensland), is whether the unit trust is a public unit trust scheme immediately prior to the acquisition of units and not after the acquisition. In other words, the landholder duty outcome is not impacted by a change in status of the landholding public unit trust to a private unit trust due to the acquisition of units.
The second acquisition
The appellant argued that the initial acquisition was not subject to landholder duty, but became a significant interest after the Fund ceased to be a widely held unit trust.
Therefore, the second acquisition was an acquisition of a further interest in the landholder(s) and only subject to duty on the 19.46% acquired.
The Commissioner argued that section 78 allows him under paragraph 78(1)(a)(ii) to aggregate the second 19.46% with the earlier interest acquired by the appellant which together amounts to a significant interest.
If the appellant was correct, duty should only be payable on the 19.46% acquired as a further interest in the fund. If the Commissioner was correct, duty should be payable on the entire 95.26% interest acquired under the two transactions.
The case noted that the appellant would have paid substantially lower duty if a single 95.26% acquisition had been made while the Fund were public unit trust schemes as duty would only have been on 10% of the assets of the Fund under the concessional duty rates that apply to acquisitions of 90% or more in a public unit trust scheme.
The Supreme Court
Nichols J held that the Commissioner was able to apply paragraph 78(1)(a) to impose duty.
In particular, the view of the court was that 78(1)(b) only applies when the original acquisition was the acquisition of a significant interest in the landholder which was a relevant acquisition. This was achieved by effectively reading words into paragraph 78(1)(b) “after a relevant acquisition by operation of paragraph (a) has been made”.
Is this decision correct
With respect to the Supreme Court, it is hard to understand what work, at all, paragraph 78(1)(b) has left to it. On the Supreme Court’s argument, where a further interest in a landholder is acquired, paragraph 78(1)(a) should always apply (as the further interest should amount to a significant interest when aggregated with earlier interests in the landholder acquired by the person or associated persons).
For example, take a situation where a person acquires the same interests in a private unit trust scheme:
Duty should be payable on the first 75.8% on 75.8% of the underlying land value; and
Duty should be payable the second 19.46% as an acquisition of 95.26% under paragraph 78(1)(a) as the acquisition of an interest that amounts to a significant interest when aggregated with the earlier interest.
There is nothing in the legislation that tells the Commissioner to go to paragraph 78(1)(b) over paragraph 78(1)(a) in this scenario.
Further, the liability provision under section 86 for paragraph 78(1)(a) does not give a discount or reduction for the duty already paid on the acquisition of an earlier interest (see subsection 86(3) compared to subsection 86(4)).
In this example, that would leave (in our view) an absurd result that the Commissioner is able to make a choice between imposing duty under paragraph 78(1)(a) on the full 95.26% or paragraph 78(1)(b) on the extra 19.46%.
To make this work, the Court has had to effectively restate the operation of section 78 (in paragraph 63):
63 To summarise, if a person makes an initial acquisition of an interest in a landholder it will be a relevant acquisition under s 78(1)(a)(i) if, at the time it is made, it reaches the applicable threshold stipulated by s 79(2). If the person makes a second or subsequent acquisition of an interest in a landholder at a time when that person has not previously made a relevant acquisition, it will be a relevant acquisition under s 78(1)(a)(ii) if it is aggregated with an earlier-acquired interest and, once aggregated, reaches the acquisition threshold applicable to the landholder at that time. If having made a relevant acquisition under either s 78(1)(a)(i) or s 78(1)(a)(ii), the person (or their associate) makes a further acquisition in the landholder, that acquisition will be a relevant acquisition under s 78(1)(b).
Again, with respect to the Supreme Court, there is nothing in paragraph 78(1)(b) that turns off paragraph 78(1)(a) and nothing that requires duty to have been paid before paragraph 78(1)(b) starts to apply.
***
Please contact us with any questions 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
Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au
