One of the largest costs of purchasing or restructuring a business in Western Australia is transfer duty. Western Australia is one of the few remaining jurisdictions, together with Queensland and the Northern Territory, where transfer duty is still applicable to the acquisition of business assets. New South Wales, Victoria, South Australia, Tasmania and the ACT have progressively moved towards a land-based duty regime, under which duty is primarily imposed on transfers of land or interests in entities that hold land.
There is relief from income tax at a Federal level for the transfer of business assets when, for example, restructuring from a discretionary trust to a company structure. While businesses in most other states can benefit from these concessions without incurring transfer duty, Western Australian businesses are often prevented from undertaking such restructures due to the significant duty impost.
Western Australia previously undertook to abolish transfer duty on business assets from 1 July 2010. This abolition was legislated for in the Duties Legislation Amendment Act 2008. However, in 2009, the impact of the global financial crisis compelled the State Government to defer the abolition date by three years to 1 July 2013. This was given effect in the Revenue Laws Amendment Act 2013.
In light of the constrained fiscal environment, low growth in the GST nationally and other funding priorities, the Duties Legislation Amendment Bill 2013 to Parliament on 22 May 2013 was introduced, which unwound the abolition of transfer duty on business assets scheduled on 1 July 2013.
As it currently stands, more than six years after the previously scheduled abolition, transfer duty continues to apply to business assets in Western Australia.
While there has been little interest by the State Government to revisit the abolition of the duty, we are seeing relevant industry bodies increasingly lobbying the change. On 20 August 2019, The Tax Institute made a submission to the Treasurer to revisit the abolition.
MKT recently met with the Shadow Minister for Housing and Corrective Services to express our concerns with the issues we are seeing our clients experiencing due to the transfer duty on business restructures.
As the Western Australian economy is showing signs of recovery, we would like to see the State Government following the other states by revisiting the abolition of transfer duty on business assets. We will be following any development on this issue closely.