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Land transfer tax

Legislative plans to curb share deals

In future, property investors will no longer be able to avoid paying land transfer tax so easily. Up until now some have been using a loophole by acquiring shares in a firm which owns real property rather than buying the property itself.

Newly built houses on old railway property in Heidelberg

Share deals lead to a loss of considerable tax revenue

Photo: imago/Jochen Tack

Under current legislation, such share deals are exempt from land transfer tax as long as investors buy less than 95 per cent of company shares. The problem, though, is that associated co-investors often buy up the remaining shares. After a five-year waiting period the shares can be combined without incurring any tax.

Reducing losses in tax revenue

The present tax regime leads to a considerable loss in tax revenue, especially in the high-end real estate sector. That is why the Federal Government set out plans in its Coalition Agreement to curb land transfer tax avoidance. Now it has put forward its proposed amendment to the Land Transfer Tax Act.

One of the key elements of the legislative amendment is the lowering of the shareholding limit from 95 to 90 per cent. The holding period will also be increased from five to ten years. These rules are set to apply to stock corporations too, rather than only to property holding partnerships, as was previously the case.