State govt to change tax rules after court loss

The state government has announced plans to amend the Stamp Act, with immediate effect, after Origin Energy successfully challenged a $3 million stamp duty assessment.

The proposed amendments relate to the controversial 'land rich' provisions, which have resulted in mining companies, power generators and other businesses having to pay stamp duty when they acquire assets in Western Australia.

The 'land rich' provisions were originally designed to stop property owners transferring their assets into a company structure prior to sale, to avoid stamp duty, but in practice have captured many other businesses.

Acting Treasurer John Kobelke said in a statement issued late yesterday that the changes would take effect immediately.

"While legislation will take some time to progress through Parliament, it is necessary to act immediately to protect the State from the potentially significant revenue loss that could otherwise arise if the effect of the decision was not addressed," Mr Kobelke said.

Specifically, the changes will ensure that 'fixtures' are deemed to be part of the stamp duty base.

The case that prompted the government response related to Origin Energy's 2002 acquisition of Fletcher Challenge South-West Co-Generation Ltd, which held a 50 per cent joint venture interest in a power station at the Worsley alumina refinery near Collie.

The Commissioner of State Revenue concluded that land represented 93.5 per cent of Fletcher Challenge's total assets (i.e. above the 80 per cent threshold applying at the time) and therefore it was a landholder for the purposes of the Stamp Act.

In May 2003 the Commissioner assessed stamp duty of $2.97 million and imposed penalty tax of 100 per cent.

Origin appealed to the State Administrative Tribunal through its law firm Jackson McDonald and last November Justice Barker ruled in its favour.

The case turned on several matters relating to the definition of "land".

The Commissioner submitted that the cogeneration plant was a fixture and, as such, conferred an equitable interest in the land on which it was located on the company.

The Tribunal found that the cogeneration plant was a fixture, but that it did not confer an equitable interest in the land on the company.

Therefore, the Tribunal found that the value of the land should not be included in the calculation of the value of the property owned by the company.

The Commissioner also submitted that the licence under which the joint venture constructed and operated the cogeneration plant ought to be properly construed as a sub-lease, and thus an interest in land for the purposes of the Stamp Act.

The Tribunal found merit in this submission but took a contrary view. It concluded that the "the licence was indeed a licence", and therefore the value of the land should not be included in the calculation of the value of the property owned by the company.

Origin submitted that the company possessed goodwill to the value of $32 million, and that this should be taken into account when assessing stamp duty. However the Tribunal concluded that the company had little, if any, goodwill at the time of its purchase.

The Minister's statement is pasted below:

Acting Treasurer moves to amend Stamp Act

6/2/08

Acting Treasurer John Kobelke today announced that the Stamp Act 1921 would be amended as a result of a recent State Administrative Tribunal decision.
Mr Kobelke said the decision in Origin Energy Power Limited and Commissioner of State Revenue (2007) WASAT 302 concerned the purchase of a co-generation plant and whether it was subject to the payment of duty under the difficult indirect land-rich duty provisions.
"As a general principle, fixtures have always been considered to be part of the stamp duty base and if left unaddressed, this decision could potentially excise this type of property from the indirect duty base," he said.
"These amendments will clarify the treatment of fixtures for the purposes of the Stamp Act land-rich provisions. Amendments will also be required to the Duties Bill currently before the Parliament."
The Acting Treasurer also pointed out that the Stamp Act amendment, when enacted, would be effective from today.
"While legislation will take some time to progress through Parliament, it is necessary to act immediately to protect the State from the potentially significant revenue loss that could otherwise arise if the effect of the decision was not addressed," Mr Kobelke said.