SA State Budget 2015-2016 - Stamp Duty Abolition Bonanza 

 
On 18 June 2015, the South Australian Government handed down its budget for the 2015-2016 financial year.

Surprising many, the Government has taken a progressive and aggressive stance to immediately abolish most forms of stamp duty applicable to South Australian property. Other heads of duty will be abolished over the next few years.

By adopting this position, the Government has removed the largest impediment to restructuring business and investments within South Australia. The beneficial changes mean that it is now time to revisit:

  • transactions which have previously been put off, shelved or delayed due to the high stamp duty costs involved;
  • any structures previously put in place to minimise a stamp duty liability (for example, where business licence arrangements have been utilised); and
  • restructuring land holdings to minimise the effect of land tax aggregation.

The particular changes are discussed in more detail below.

Share Duty

Stamp Duty on transfers of shares will be abolished effective from 18 June 2015.

Where a share transfer is executed on or after 18 June but prior to the amendments being passed into law, the stamp duty will be paid by the Government on behalf of the taxpayer by way of ex gratia relief.

This brings South Australia in line with most other jurisdictions in Australia, and means we can finally abandon the practice of incorporating companies in Victoria.

Subject to the comments below, duty will still be imposed on shares which fall within the landholder provisions.

Non-real Property

Stamp Duty on transfers of all non-real property will be abolished effective from 18 June 2015. This means that, with some limited exceptions, all transfers of property (other than real property) will be exempt from duty in South Australia.

Real property essentially comprises land, exploration tenements and fixtures.

Of primary importance, this means that transfers of intangible assets (e.g. goodwill, trade debts, intellectual property, statutory licences) and tangible assets (e.g. plant and equipment) no longer attract stamp duty. This provides a substantial benefit to South Australian taxpayers who have considered restructuring their business but have delayed doing so due to transactional costs, as well as parties negotiating for the sale and purchase of a business.

Where a non-real property transfer is executed on or after 18 June but prior to the amendments being passed into law, the stamp duty will be paid by the Government on behalf of the taxpayer by way of ex gratia relief.

Unit Trusts

Stamp Duty on the issue, transfer or redemption of units in a unit trust will be abolished from 1 July 2018.

Notwithstanding this delayed abolition, provided the Unit Trust does not hold real property, any issue, transfer or redemption will be exempt from duty effective from 18 June 2015.

Non-residential, Non-primary Production Real Property

The South Australian Government has indicated it will abolish stamp duty on non-residential, non-primary production real property transfers. It will be the first jurisdiction in Australia to do so.

This concession will effectively apply to all commercial and industrial premises in South Australia. Importantly, it will not apply to primary production land (although that land may be exempt under other provisions).

This duty will be phased out over a three year period commencing 1 July 2016. Duty rates will be reduced by a third from 1 July 2016, a further third from 1 July 2017, and be fully abolished from 1 July 2018.

Due to the three year phase out, a new anti-avoidance provision will be enacted to catch taxpayers who attempt to artificially structure their affairs in order to take advantage of a lower rate of duty in the future.

Landholder Duty

Effective from 1 July 2018, the $1 million threshold used to determine whether an entity is subject to the land holder provisions will be removed.

This means that from 1 July 2018, the provisions will apply to every landholding entity regardless of the value of the underlying land.

However, to coincide with the removal of duty on non-residential and non-primary production land, the land holding provisions will only apply where entities hold South Australian residential or primary production land.

Corporate Reconstruction Relief

Corporate reconstructions were previously offered ex gratia relief only.

From 18 June 2015, the Government will provide a statutory stamp duty exemption and expand the existing eligibility criteria for corporate reconstructions. This will make it easier for businesses to restructure their operations.

Miscellaneous Amendments

Many other minor amendments have been proposed, including:

  • provide a statutory exemption for charities and religious bodies purchasing land, provided that land is not wholly or predominantly used for business or commercial purposes;
  • provide greater clarity and availability of the stamp duty exemption for interfamilial farm transfers. This change will take effect from the date of assent of amended legislation;
  • extend the definition of ‘family group’ in the Stamp Duty Act to include domestic partners (including those of the same sex);
  • removing the requirement that a taxpayer pay all the tax in dispute prior to appealing a taxation decision. A 50% payment will be required in its place;
  • extend the small business payroll tax rebate for the 2015-2016 financial year. The rebate provides payroll tax relief for employers with taxable wages under a $1.2 million threshold;
  • remove the exemption available in relation to the partition of property between members of a family group;
  • extend the exemption from land tax where a person is transitioning from one principal place of residence to another; and
  • clarify and tighten the land tax minority interest anti-avoidance provisions.

For more specific information on any of the material contained in this article please contact Kale Rigano on 08 8210 1207 or krigano@normans.com.au.