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.