Western Australia expands its duty baseDecember 18, 2018

On 29 November 2018, the Revenue Laws Amendment Bill 2018 (the Bill) was introduced into the Western Australian Legislative Assembly.

The Bill significantly expands the range of transactions that attract duty in Western Australia and represents the most comprehensive changes to the Western Australian stamp duty regime since the current Duties Act 2008 (WA) (Duties Act) commenced on 1 July 2008.

Of particular interest to the corporate community is the new limitations on corporate restructures. When the Duties Act was introduced in 2008, the corporate reconstruction exemption rules abandoned any requirement for group companies to remain associated for a minimum period following an intra-group transfer of assets.

Coupled with this is the fact that Western Australia is one of the few Australian states and territories that still imposes duty on a direct transfer of business assets (e.g. goodwill). By contrast, an indirect transfer of such assets (e.g. through selling the shares in a company that holds non-land business assets) does not attract any duty.

One consequence of this has been that taxpayers looking to dispose of non-land business assets could package those assets in a company, claim a corporate reconstruction exemption, and then dispose of the company (holding only non-land assets) without triggering any duty.

The Bill proposes changes under which an exemption for an intra-group transfer of dutiable property will be automatically revoked if, within 3 years of the transfer, the transferee of the dutiable property ceases to be more than 50% commonly owned and controlled as the transferor. The object of these amendments is to prevent parties from packaging business assets into a company structure so that a third party can acquire them without paying duty.

Some of the key points to note about the updated provisions are:
• unlike other jurisdictions that impose a post association requirement in the criteria for corporate reconstruction exemptions, under the Bill, the exemption will only be revoked:
– if the transferee leaves the group (rather than any group member that is party to the transaction); and
– if the transferee ceases to be 50% (rather than 90%) owned and controlled; and
• a transaction will only qualify for relief if the consideration for the transaction is provided from a group member or is provided by way of a loan.

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