The Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd v Commissioner of State Revenue [2024] case was determined in the Victorian Court of Appeal on 8 August, when the Court unanimously upheld the government’s claim to charge duty on a capital raise, finding that although 18 separate investors (unrelated), acquiring less than 20% individually (99.9% collectively), of the issued shares in a landholder pursuant to a broadly circulated information memorandum (IM) amounted to substantially one arrangement (related).
The Court’s reasoning indicates that the aggregation test is able to be applied broadly, and unfortunately leaves open the possibility that in other scenarios, including some factors on their own may be sufficient to find a liable duty event. The court concluded that in this situation it was enough in their view that the factors combined in this matter supported the conclusion that the acquisitions by the various “unrelated” investors are to be aggregated.
The significance of the decision for industry more broadly, as well as the position of the State Revenue Office (SRO), cannot be understated. The potential impacts we have identified from the decision means that almost any capital raising that equates (in aggregate) to an interest equal to or greater than the relevant landholder duty significant interest threshold (i.e. 20% for Victorian private unit trusts and generally 50% for other landholders) could result in landholder duty being payable, in addition to the ordinary transfer duty that applies to the acquisition of the land itself.
Historical as well as current capital/fund raises that were or are related to land/land investment projects are potentially exposed to duty. The Oliver Hume matter relates to an issue of shares that occurred a decade ago. We now expect the SRO to consider investigating historical matters that are within its 5-year administrative review period.
Contagion and precedent risk means the issues are not necessarily limited to Victoria.
Advocacy efforts have already commenced in New South Wales and and we are now looking at next steps to work with the Victorian Government to determine their final position and how they are planning to determine the tax liability on capital raises for future deals.
We will continue to keep members updated through our Advocacy Alerts and committees.