A common misconception is that buying shares in a company that owns property avoids stamp duty. That logic appears solid. Land does not change hands, and the title stays the same name, with nothing lodged at the Titles Office.
Part of the reason the misconception is so common is that it starts from a correct premise. A transfer of shares in a private or public company generally does not attract duty. The Queensland government abolished the duty on share transfers several years ago, so most share sales incur no duty.
The exception is where the company holds Queensland land worth $2 million or more, even if that land is mortgaged. In that case, a significant acquisition of the shares in that company is treated much like buying the land itself, and duty becomes payable.
The Duties Act 2001 (Qld) looks through the company to the land and charges duty on the shares. This is referred to as landholder duty.
There are exemptions and concessions available; however, exemptions contain strict conditions and usually need a written application to the Commissioner of State Revenue, planned before signing.
What Is Landholder Duty?
The Duties Act 2001 (Qld) imposes landholder duty under Chapter 3. It exists to stop people avoiding transfer duty by buying the entity that owns the land instead of the land itself.
A landholder is a company (listed or unlisted) that holds Queensland land with an unencumbered value of $2 million or more. “Unencumbered” means the value ignores any mortgage over the land, so a heavily geared property still counts at its full market value.
Land holdings are measured broadly. They include:
- land the company owns directly
- land owned by its subsidiaries and further down the corporate chain
- items fixed to the land, such as buildings and certain plant and equipment
When Does Landholder Duty Apply?
Landholder duty is triggered when a person makes a relevant acquisition, which means acquiring a significant interest in a landholder. A significant interest is:
- 50% or more of a private (unlisted) company
- 90% or more of a listed company
An acquisition is also caught if it increases an interest that was already a significant interest.
Aggregation
The significant interest test is not applied to each purchase in isolation. Interests held or acquired by related persons are added together. Related persons include spouses and other family members, related companies and, in some cases, trusts in which family members are beneficiaries. Interests acquired under associated transactions are also aggregated.
This means a husband and wife who each buy 30% of a company have together made a 60% acquisition, and duty applies. Buying 49% now and the balance later, or splitting a purchase between family entities, will generally not avoid the duty.
Timing
The acquirer must lodge a landholder duty statement (Form D3.3) with Queensland Revenue Office within 30 days of the relevant acquisition. Interest and penalty tax can apply to late lodgement and payment.
How Is Landholder Duty Calculated?
For a private company, duty is charged at ordinary transfer duty rates on the buyer’s proportionate share of the company’s Queensland land holdings. The price paid for the shares is not the measure. The measure is the market value of the land.
Example
A private company owns Queensland land valued at $2.8 million. A buyer acquires 60% of its shares. The dutiable value is 60% of $2.8 million, being $1.68 million, and transfer duty is calculated on that figure. On Queensland Revenue Office’s own worked example, that produces duty of $77,125.
The buyer pays this even though the company’s debt may mean the shares were bought for far less than $1.68 million.
Excluded interests
Some interests the buyer already holds can be left out of the calculation. The most common is an interest held by the buyer or a related person for more than 3 years before the new acquisition, provided it was not part of the same arrangement. For example, a shareholder who has held 40% for four years and then buys a further 20% pays duty on the 20% only.
Foreign acquirers
If the buyer is a foreign person and the company holds residential land, additional foreign acquirer duty (AFAD) of 8% applies on top of landholder duty, calculated on the buyer’s share of the residential land. Foreign status is tested broadly for companies and trusts, so an Australian company with foreign shareholders can be caught.
Are There Exemptions to Landholder Duty?
There are genuine avenues for relief, but none of them apply automatically. Each has conditions that must be met, and several must be applied for in writing.
Corporate reconstruction
The most significant exemption is for restructures within a corporate group. Broadly, companies are in the same group where one company directly owns at least 90% of the shares in another and has voting control, and so on down the chain. A relevant acquisition in a landholder made as part of a corporate reconstruction within that group may be exempt.
This exemption requires careful process:
- The group must apply in writing to the Commissioner of State Revenue.
- The application must explain the purpose of the transaction and any related transactions, how the consideration has been provided (for example, through an intercompany loan), and include a diagram of the corporate structure and company records.
- For a proposed transaction, a ruling can be sought before the transaction proceeds. Queensland Revenue Office aims to decide applications within 30 business days and does not offer an urgent service, so this needs to be built into the transaction timetable.
- The exemption can be clawed back. If, within 3 years, the companies stop being group companies, or consideration is provided or received by someone outside the group, the group must notify Queensland Revenue Office within 28 days and duty may be reassessed.
The corporate reconstruction exemption is designed for restructures within an existing group. It does not assist a sale of shares to an unrelated buyer.
Other exemptions
Depending on the circumstances, landholder duty may also not apply where the acquisition:
- occurs through the distribution of a deceased estate
- is solely for the purpose of changing a trustee
- is made solely in the capacity of a liquidator, or under a creditors’ arrangement approved under the Corporations Act 2001 (Cth)
- is the initial allotment of shares on registration of a company that already owns the land
- relates to land that could have been acquired directly without transfer duty, such as some transfers following the breakdown of a marriage or de facto relationship
There is also a concession for business property in certain family businesses, and deductions where other duty has already been paid on a linked transaction.
These exemptions are found in sections 185 to 196 and Chapter 10 of the Duties Act 2001 (Qld). Whether one applies turns on the precise facts, the sequence of steps and the documents used.
Issues to Consider
- The company, or any subsidiary, owns Queensland land worth $2 million or more, even if it is heavily mortgaged.
- You, your spouse, family members or related entities already hold shares, or are buying at the same time.
- The purchase is being staged, or split between entities, to keep each acquisition under 50%.
- A buyer is a foreign person and the entity holds residential land.
- The transaction is described as a restructure or reorganisation within a group and nobody has yet looked at the corporate reconstruction exemption or its 3 year conditions.
- The share sale agreement is silent on who bears any landholder duty.
Speak to Us First
The structure of a transaction can affect whether landholder duty applies and whether an exemption is available. It is best to consider the duty position early, while there is still room to shape the transaction.
If you are buying or selling shares in a company that holds Queensland property, or restructuring a group that does, contact Ardor Legal before committing to the proposed structure. We can review the transaction, identify potential duty implications and, where an exemption may be available, work with you and your accountant on the application.
Book a complimentary 15-minute discovery meeting to discuss your plans before you sign.
Frequently Asked Questions (FAQs)
Do I pay stamp duty if I buy shares in a company that owns Queensland property?
Usually, yes. If the company holds Queensland land worth $2 million or more and you acquire 50% or more (counting related persons), landholder duty is charged at transfer duty rates on your share of the land’s value.
Is there stamp duty on share transfers in Queensland?
Generally, no. Most transfers of shares in Queensland do not attract duty. The main exception is where the company holds Queensland land worth $2 million or more, in which case landholder duty may apply.
What is the landholder duty threshold in Queensland?
Landholder duty applies where a company holds Queensland land with an unencumbered value of $2 million or more, and a person acquires 50% or more of a private company or 90% or more of a listed company.
Does landholder duty apply to foreign buyers?
Yes, and more may be payable. If the buyer is a foreign person and the company holds residential land, additional foreign acquirer duty of 8% applies on top of landholder duty.
We are restructuring our own group. Is that exempt from landholder duty?
Maybe. Queensland’s corporate reconstruction exemption can apply to certain acquisitions within a corporate group, provided the group and transaction meet the eligibility requirements.
