Landholders told to review historical capital raisings after Hume decision
The Victorian State Revenue Office has urged landholders to review their historical capital raisings following the recent Oliver Hume decision handed down by the Court of Appeal.
Following the recent decision Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd v Commissioner of State Revenue [2024] VSCA 175, the Victorian State Revenue Office is encouraging advisers and landholders to review previous historical capital raisings with the State Revenue Office planning to commence a compliance program on capital raisings.
In the Oliver Hume decision, the court unanimously upheld the decision of the Victorian Civil and Administrative Tribunal (VCAT). The court found that the acquisitions made in the applicant landholder pursuant to a conditional capital raising were subject to duty as an associated transaction notwithstanding that the acquirers were not acquainted with each other.
The Victorian State Revenue Office said the decision by the Court of Appeal affirms the Commissioner's interpretation and application of the associated transaction definition as set out in Revenue Ruling DA-057v2.
"The decision also confirms the Commissioner’s long-standing practice and treatment of acquisitions under conditional capital raisings in special purpose vehicles set up as syndicated property investments," it said.
The Victorian State Revenue Office noted that the decision does not mean all capital raisings are subject to duty as associated transactions.
"Nor does it change the Commissioner’s approach to interests acquired by independent members of the public under a genuine public offer as explained in Revenue Ruling DA-057v2," it said.
"This is because of the specific provisions that apply to arrangements involving the conversion of private landholders to public landholders."
The revenue office said the Commissioner will not treat interests acquired under a genuine public offer as an associated transaction where the arrangement is subject to concessional duty under the conversion provisions in section 89B or 89C of the act.
In a recent update, the Victorian State Revenue Office said it is aware that advisers and landholders may have taken a different view regarding the application of the associated transaction provision to capital raisings as set out in the revenue ruling and confirmed by the Court of Appeal.
The Victorian State Revenue Office has announced it will be commencing a compliance program on capital raisings in landholders.
However, it will give landholders a penalty tax amnesty on voluntary disclosures of liabilities arising from capital raisings until 31 March 2025.
"During that time, the Commissioner will remit all penalty tax and will only impose interest at the market and reduced 3 per cent premium rates on any disclosed liabilities arising from capital raisings in landholders," it said.
"After that time, the Commissioner will commence a compliance program on capital raisings in landholders and will impose relevant rates of penalty tax and interest on any identified liabilities."
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