Victorian SRO announces landholder duty penalty tax amnesty
Following the Victorian Court of Appeal’s decision affirming the Victorian Commissioner of State Revenue’s interpretation of ‘associated transactions’ in the landholder duty context, the Victorian State Revenue Office (SRO) has announced a penalty tax amnesty for landholders that voluntarily disclose liabilities arising from capital raisings. Under this amnesty – running until 31 March 2025 – all penalty tax will be remitted, and instead only interest at the market rate and a reduced 3 per cent premium rate will be imposed on disclosed liabilities. After this period, the SRO will begin a compliance program, applying standard penalty tax and interest rates on any identified liabilities.
The Victorian Court of Appeal decision in Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd v Commissioner of State Revenue [2024] VSCA 175 (Diamond Creek case) was handed down in August this year (see our previous update on the decision). It upheld the earlier decision of the Victorian Civil and Administrative Tribunal (VCAT) against the taxpayer.
The Diamond Creek case underscored the complexity of raising capital in entities with pre-existing land interests. In the case, 18 separate and independent investors acquired 99.99 per cent of the issued shares in a ‘landholder’ entity under a broadly circulated information memorandum. As the court found these acquisitions constituted ‘substantially one arrangement’, landholder duty was assessed on the acquisition of the shares in the landholder, in addition to the duty paid on the purchase of the landholder’s underlying property. It was effectively double duty.
While questions remain as to how broadly the decision in the Diamond Creek case may be applied, it will be interesting to see the extent to which the amnesty is adopted. In recent times, we have seen similar amnesties offered in the payroll tax context with limited uptake. Landholders and advisers who may have previously interpreted the associated transaction provisions differently are encouraged to review their historical capital raisings and consider making a voluntary disclosure. It remains to be seen how many will take advantage of this opportunity to mitigate potential penalties before the compliance program begins. If you require advice regarding your potential exposure or would like assistance in making a voluntary disclosure, please contact us.
