+ Stamp Duty and Land Use Entitlements

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Whilst the Duties Act is now is over twelve years old, its implications continue to give accountants, lawyers and their clients nasty surprises.

For example, consider a family company which owns a share portfolio, residential property and commercial property all of which were purchased shortly after capital gain tax was introduced. The mother and father wish to give their daughter the commercial property by simply issuing new shares to the daughter with exclusive occupation rights to the property: stamp duty will be payable on the issued shares, because the shares have a land use entitlement attached to them!

Land use entitlements are dutiable property under s11(1)(c) of the Duties Act and the acquisition of a land use entitlement by the allotment of shares is dutiable under Part 4 of Chapter 3 of the Duties Act (ss132-137) at ad valorem rates.

Calculation of the amount of duty payable is based on the dutiable value of the land use entitlement, which in this case is likely to be the value of the property, as the shares give the daughter effective ownership and control over this. As the saying goes, if it looks too good to be true, it usually is.

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