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The Queensland Government has announced significant changes to the stamp duty treatment of transactions involving exploration tenements, effective from 10.30am on 13 January 2012 (Start Time). Stamp duty specialist in the resources sector Duncan Bedford summarises the changes and their implications for minerals exploration.
The changes effectively mean that from the Start Time, the following tenements (Exploration Tenements) will be characterised as both ‘dutiable property’ and ‘land’ for Queensland duty purposes:
- prospecting and exploration permits under the Mineral Resources Act 1989
- authorities to prospect under the Petroleum and Gas (Production and Safety) Act 2004 (including those under the previous Petroleum Act 1923)
- geothermal exploration permits under the Geothermal Exploration Act 2004, and
- GHG exploration permits under the Greenhouse Gas Storage Act 2009.
This means that duty at a rate of up to 5.25% could be payable on the value of Exploration Tenements on the acquisition of either an interest in the Exploration Tenements directly, or the acquisition of an interest in a company that owns those Exploration Tenements (either directly or indirectly).
The amending legislation is yet to be released but when it is, it is expected to have retrospective application back to the Start Time.
If a contract for the transfer of an Exploration Tenement itself was executed prior to the Start Time, with completion to occur after the Start Time, then the new rules should not apply (i.e. the Exploration Tenements should not be characterised as dutiable property for that transaction).
If there is no binding agreement to transfer before the Start Time, any transfers of these Exploration Tenements will be subject to duty at a rate of up to 5.25% on the higher of the purchase price or the unencumbered value of the tenement.
This change also applies to the acquisition of units in unit trusts and interests in partnerships that hold Exploration Tenements.
The announcement also indicates that these Exploration Tenements will be defined as ‘land’ for landholder duty purposes. This could mean significant duty on the acquisition of shares in a company that holds (directly or indirectly) Exploration Tenements.
Important Note: the way the announcement (and existing legislation) is drafted suggests that this change can impact transactions even where an agreement for the acquisition of shares was signed before the Start Time, but is to complete after the Start Time.
It is vital to review all existing and proposed transactions (both asset transfers and share dealings) involving Queensland Exploration Tenements that are yet to complete and seek urgent updated duty advice in light of these announced changes to the duty law.
McCullough Robertson’s specialist stamp duty team is strongly focused on the resources sector and is able to provide expert advice on the implications of these changes and the possible options for managing your duty liability.
Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.