State Revenue Office of Victoria (SRO) penalty tax amnesty: Capital raisings following the Oliver Hume decision
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The State Revenue Office of Victoria (SRO) has announced that the penalty tax amnesty (Amnesty), which was due to expire on 31 March 2025, has now been extended to 30 June 2025. In summary, the Amnesty seeks to encourage taxpayers to make a voluntary disclosure or make a request for a private ruling in relation to potential liabilities arising from capital raisings.
The genesis of this Amnesty arises from the Victorian Commissioner of State Revenue’s success in both the Victorian Court of Appeal and the Victorian Civil and Administrative Tribunal in the Oliver Hume landholder dispute.
Oliver Hume dispute over landholder duty
The Oliver Hume dispute concerned the issue of shares to 18 investors in Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd (Taxpayer) through a capital raising to fund a property development project in Diamond Creek, Victoria.
The Commissioner issued the Taxpayer with an assessment to landholder duty on the basis that the acquisition of shares by the investors constituted a relevant acquisition through the operation of the aggregation provisions.
More particularly, the Commissioner assessed the Taxpayer on the basis that the relevant acquisitions by each of the investors were to be aggregated as they constituted an “associated transaction”.
The Taxpayer appealed the VCAT decision, arguing that the investors’ acquisitions should not be aggregated under the “associated transaction” provision due to the fact that the investors were not acquainted with each other.
The Court of Appeal found that the acquisitions of interests by the investors did not focus on the relationship between the relevant acquirers but on the relationship between the acquisitions and the ‘arrangement’ or ‘transaction’.
The Court of Appeal found that, in this regard, when the acquisitions were considered, it could be characterised as constituting essentially ‘one’ arrangement for the key reasons below.
- No individual acquisition could go ahead unless a total of $1.8 million was raised in the capital raising and as such the relevant acquisitions/transactions were dependent on each other.
- The relevant documents evidenced that the investors together had an interest in a special purpose vehicle entity which was solely established to undertake a single property development project, which would be wound up at the end of the project.
- The effect of the acquisitions comprising a total of 99.99% of shares in the Taxpayer, on the same day, had the effect of the shareholding being altered from an Oliver Hume entity to ownership by the group of private investors.
Implications of the Oliver Hume decisions
As noted on the SRO’s website, not all capital raisings in a landholder will be subject to landholder duty through the application of the aggregation provisions. The SRO website states that this does not affect the Commissioner’s approach to interests acquired by members of the public under a public offer, as noted in SRO Revenue Ruling DA–057v2.
The Oliver Hume decisions question whether formal capital raisings are appropriate, due to the high likelihood that similar capital raisings to the Oliver Hume example will result in land transfer duty applying on the acquisition of the land, and subsequently again when acquisitions of interests in the land owner occurs.
In tangent, the question of whether other structures or steps for capital raisings would be more appropriate, is also relevant.
The importance for both land owners and investors to understand the Victorian duty implications of entering into a capital raising cannot be understated. Land owners and investors should be aware of what terms in the relevant documents will result in landholder duty being applied.
Thomas Abraham from our tax team at Macpherson Kelley is here to help you understand how the landholder duty provisions apply. Contact Thomas to discuss how we can assist you in managing your landholder duty obligations effectively.
The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.
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State Revenue Office of Victoria (SRO) penalty tax amnesty: Capital raisings following the Oliver Hume decision
The State Revenue Office of Victoria (SRO) has announced that the penalty tax amnesty (Amnesty), which was due to expire on 31 March 2025, has now been extended to 30 June 2025. In summary, the Amnesty seeks to encourage taxpayers to make a voluntary disclosure or make a request for a private ruling in relation to potential liabilities arising from capital raisings.
The genesis of this Amnesty arises from the Victorian Commissioner of State Revenue’s success in both the Victorian Court of Appeal and the Victorian Civil and Administrative Tribunal in the Oliver Hume landholder dispute.
Oliver Hume dispute over landholder duty
The Oliver Hume dispute concerned the issue of shares to 18 investors in Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd (Taxpayer) through a capital raising to fund a property development project in Diamond Creek, Victoria.
The Commissioner issued the Taxpayer with an assessment to landholder duty on the basis that the acquisition of shares by the investors constituted a relevant acquisition through the operation of the aggregation provisions.
More particularly, the Commissioner assessed the Taxpayer on the basis that the relevant acquisitions by each of the investors were to be aggregated as they constituted an “associated transaction”.
The Taxpayer appealed the VCAT decision, arguing that the investors’ acquisitions should not be aggregated under the “associated transaction” provision due to the fact that the investors were not acquainted with each other.
The Court of Appeal found that the acquisitions of interests by the investors did not focus on the relationship between the relevant acquirers but on the relationship between the acquisitions and the ‘arrangement’ or ‘transaction’.
The Court of Appeal found that, in this regard, when the acquisitions were considered, it could be characterised as constituting essentially ‘one’ arrangement for the key reasons below.
- No individual acquisition could go ahead unless a total of $1.8 million was raised in the capital raising and as such the relevant acquisitions/transactions were dependent on each other.
- The relevant documents evidenced that the investors together had an interest in a special purpose vehicle entity which was solely established to undertake a single property development project, which would be wound up at the end of the project.
- The effect of the acquisitions comprising a total of 99.99% of shares in the Taxpayer, on the same day, had the effect of the shareholding being altered from an Oliver Hume entity to ownership by the group of private investors.
Implications of the Oliver Hume decisions
As noted on the SRO’s website, not all capital raisings in a landholder will be subject to landholder duty through the application of the aggregation provisions. The SRO website states that this does not affect the Commissioner’s approach to interests acquired by members of the public under a public offer, as noted in SRO Revenue Ruling DA–057v2.
The Oliver Hume decisions question whether formal capital raisings are appropriate, due to the high likelihood that similar capital raisings to the Oliver Hume example will result in land transfer duty applying on the acquisition of the land, and subsequently again when acquisitions of interests in the land owner occurs.
In tangent, the question of whether other structures or steps for capital raisings would be more appropriate, is also relevant.
The importance for both land owners and investors to understand the Victorian duty implications of entering into a capital raising cannot be understated. Land owners and investors should be aware of what terms in the relevant documents will result in landholder duty being applied.
Thomas Abraham from our tax team at Macpherson Kelley is here to help you understand how the landholder duty provisions apply. Contact Thomas to discuss how we can assist you in managing your landholder duty obligations effectively.