Key points

• Entities owning land in any jurisdiction other than the ACT valued at or above the relevant land value threshold for each jurisdiction (AU$1 million or more for Victoria, AU$2 million for more for New South Wales) must carefully consider duty implications for future and past capital raisings.
• Victorian Supreme Court held that separate investors responding to a widely circulated information memorandum (IM) were effectively grouped with the individual acquisitions taxed as one arrangement. 
• There is no blanket rule on whether a widely circulated IM will trigger these provisions.
• For future transactions, ensure all relevant documents are drafted to avoid triggering landholder duty.
• Entities should review historic transactions relating to Victoria land holdings before 31 March 2025 to assess potential liability and consider relying on the landholder duty penalty tax amnesty if applicable.

Oliver Hume Property Funds Pty Ltd v Commissioner of State Revenue [2024] VSCA 175 

In this case the Commissioner successfully argued that the acquisition of issued shares in a landholder by 18 separate investors pursuant to a widely circulated IM should be treated as one arrangement. The consequence was that duty of AU$151,235 was incurred. If treated separately no duty would have been payable. Penalties and interest were also imposed for failing to disclose the acquisition. 

Background 

The sole activity of Oliver Hume Property Funds Diamond Creek Pty Ltd (OHDC) was to conduct a property development project on land acquired in 2011 in Diamond Creek, Victoria. In 2014 OHDC circulated an IM to raise AU$1.8 million through an issue of shares. Ultimately shares were acquired by 18 separate investors in different proportions (none of which individually exceeded 11.1%). 

Under the IM investors delegated operations and investment decisions to the Board and to the applicant’s management team and investors agreed to the appointment of a specified Manager to manage the day-to-day affairs of OHDC.

The individual investors were not provided with the names or details of other investors, nor would that information have been provided to them by the management company if requested. 

Legislation

Under the Duties Act 2000 (Vic), the acquisition of significant interests in a landholder (a company or trust with landholdings in Victoria of AU$1 million or more) are dutiable. Significant interests are:

• Private unit trust: 20% or more
• Private company or wholesale unit trust: 50% or more
• Listed company or public unit trust: 90% or more

Section 78 states that a person makes a relevant acquisition if they acquire an interest in a landholder that amounts to a significant interest when aggregated with other interests acquired by “any other person in an associated transaction”. 

"Associated transaction" is defined in section 3, as an acquisition of an interest in a landholder by a person, means an acquisition of an interest in the landholder by another person in circumstances in which—

• those persons are acting in concert; or
• the acquisitions form, evidence, give effect to or arise from substantially one arrangement, one transaction or one series of transactions;”

Judgement

The judgment turned on the meaning of the phrase ‘associated transaction’. 

The subjective knowledge of the individual investors was said to not be important. Rather, the focus was on the relationships between the acquisitions and the singular ‘arrangement’ in focus. The property development arrangement entered into by each investor following the distribution of the IM was viewed as having a quality of ‘oneness’, given that, while the investors were unconnected and not acting in concert, they shared a purpose in investing in the same property development project in the same way. 

The factors that supported this were:

• The requirement to raise a total of AU$1.8 million before any acquisition could proceed.
• Investors were bound by the Constitution, which stated it was a single-purpose entity to develop the land.
• The acquisitions collectively changed the company's ownership by 99.99%.

Accordingly, the court found that all investments constituted "substantially one arrangement," triggering landholder duty. 

State Revenue Office Amnesty

The Victorian State Revenue Office has announced the following in relation to transactions that have been implemented without disclosure to the Revenue:

• Taxpayers who voluntarily disclose liabilities arising from implemented capital raisings or apply for a private ruling to determine liability by 31 March 2025 will not incur penalties for late disclosure and interest will be imposed at the market and reduced 3% premium rates.
• From 1 April 2025 the Commissioner will commence a compliance program on capital raisings, imposing penalty tax and interest on identified liabilities.

Relevance to other States and Territories 

While the decision in Oliver Hume only applies directly to landholder duty in Victoria, it is important to consider how the reasoning adopted by the Court may extend to other jurisdictions. 

Similar provisions which aggregate interests which give effect to “substantially one arrangement”, or treat persons who are acting in concert or who acquire interests by virtue of acquisitions that together form or arise from substantially one transaction as “associated persons” or “related persons” exist in most State and Territory duties legislation, excluding the ACT.  Given the broad scope of the ‘associated transaction’ provisions, there is potential for the reasoning in the Oliver Hume decision to be extended beyond Victoria. Entities should carefully consider duty implications for future and past capital raisings.