Land Rich companies

[NedKelly]

A colleague has got himself into a bit of a pickle and had to declare bankruptcy. He owns a 50% share in a company that owns some land but pretty much has a negative net asset value taking into account the debts owing, i.e. land tax, rates, bank, etc. His trustee in bankruptcy is happy to transfer his share to me for a nominal price since it has no real value he can access from the company. Unfortunately I then found out that the OSR would want about $32,000 in tax if I transferred the share as it was considered a share in a "land rich" company.

Anyone got any ideas how to get around this?

 

[ianvestor]

Anyone got any ideas how to get around this?

What are you trying to achieve exactly? Why does he want to sell his share of the business to you? By nominal, do you mean like $1?

 

[NedKelly]

He doesn't want to sell his share, his trustee in bankruptcy wants to get rid of it because there is no value in it and it will cost them money to administrate it which they won't get back from what is left of his other assets.

What am I trying to achieve; not sure really, but an asset with potential growth is always worth having. Not if it costs a bucket on duty though!

By nominal, should be $1 but they want more to pay for their time and to justify the fact that they got some money in for the creditors.

 

[Terryw]

Hello Ned

To avoid the stamp duty you will have to make the company a non land rich company. From memory, a company is Land Rich if he owns land more than $2mil in value AND this is more than 60% of the company's assets (and this includes related companies).

So what you could do is make up a related company and then help it acquire more assets so that the land falls short of the 60%!

I haven't looked up anything, so this may be totally off the mark.

 

[NedKelly]

Hello Ned

To avoid the stamp duty you will have to make the company a non land rich company. From memory, a company is Land Rich if he owns land more than $2mil in value AND this is more than 60% of the company's assets (and this includes related companies).

So what you could do is make up a related company and then help it acquire more assets so that the land falls short of the 60%!

I haven't looked up anything, so this may be totally off the mark.

Thanks Terry, a nice idea for me to think on. In Queensland the threshold is $1M.

 

[Terryw]

Sorry, I had assumed NSW - which is $2mil i think