Part 3, Division 6 “Grouping of Related Corporations” of the Land Tax Act 1936 provides for corporations to be related corporations in certain circumstances.

Where 2 or more corporations that own land are related corporations, they are to be jointly assessed for land tax on the land as if it were owned by a single corporation.

A corporation may have various interests in land arising by way of:

• being the sole owner;
• being a joint owner;
• having beneficial interest(s) in any number of fixed trusts, where a notification of beneficial interest is in force; or
• being a unitholder in any number of unit trusts, where a notification of unit holdings in the trust is in force.

Land that is or exempt from land tax under the Land Tax Act 1936 is not liable to land tax. Accordingly, land that is exempted from land tax will not be included in the taxable value of land in an assessment of a land tax liability.

The following discussion therefore proceeds on the basis that any land exempted from land tax will not be included in any assessment of a land tax liability.

Sections 13G and 13I set out the circumstances in which corporations are related to each other. The different means by which corporations are grouped are discussed further below.

Subject to Section 13G(5) (discussed further below), Section 11 operates such that where a corporation is the owner of land as trustee of a trust (other than a trust arising because of a contract to purchase or acquire an estate or interest in the land), the trustee will instead be assessed for land tax on the whole of the land subject to the trust as if the land were the only land owned by the trustee.

This means that where an interest in land is held on trust, the taxable value of the interest in that land:

• will be aggregated with the taxable value of other land subject to the same trust; but
• will not be aggregated with the taxable value of other land not subject to the same trust.

Section 11 only applies where the land is directly owned by the trustee (discussed further below).

Land owned by a corporation as trustee of a trust is liable for land tax at the trust rates and will be subject to the trust provisions, except where Section 13G(5) applies (discussed further below).

See the Guide to Legislation - Land Tax: Land Held on Trust for more detailed information.

Section 13J(1) provides that related corporations that own land are to be jointly assessed for land tax on the land as if it were owned by a single corporation.

In this regard, Section 13J(1) requires that there needs to be 2 or more related corporations that own land in order for the section to apply.

As such, Section 13J will not apply where only one related corporation owns land.

Section 13G(2) provides that 2 corporations are related to each other if one of those corporations:

• controls the composition of the board of the other corporation; or
• is in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other corporation; or
• holds more than 50% of the issued share capital of the other corporation.

Section 13G(3) provides that corporations are related if a person (including a corporation) has, or persons (including corporations) have together, a controlling interest in each of the corporations.

Section 13H provides that a person has, or persons have together, a controlling interest in a corporation if:

• that person, or those persons acting together, can control the composition of the board of the corporation; or
• that person is, or those persons acting together are, in a position to cast or control the casting of more than 50% of the maximum number of votes that might be cast at a general meeting of the corporation; or
• that person holds, or those persons acting together hold, more than 50% of the issued share capital of the corporation.

A person does not need to have a controlling interest in 2 corporations by the same means for a group to exist.

For example, if a person is able to cast more than 50% of the votes at a general meeting of the corporation, and that same person also owns more than 50% of the issued share capital of another corporation, the 2 corporations are related because the same person has a controlling interest in both corporations.

Section 13G(4) provides that corporations are related corporations if:

• more than 50% of the issued share capital of one of those corporations (corporation 1) is held by the other corporation (corporation 2) together with the shareholders of corporation 2; and
• the percentage of the issued share capital of corporation 2 held by shareholders of corporation 1 is more than the difference between 50% and the percentage of the issued share capital of corporation 1 held by corporation 2.

The corporations will be related where the following conditions are satisfied:

X + Y > 50% and Z > 50% – X.

where:

X is the shareholding in corporation 1 held by corporation 2 expressed as a percentage.

Y is the shareholding in corporation 1 held by the shareholders common to both corporations expressed as a percentage.

Z is the shareholding in corporation 2 held by the shareholders common to both corporations expressed as a percentage.

Section 13G(5) provides that corporations are related if one of the corporations (corporation 1) is the trustee of a fixed trust or a unit trust scheme (the trust) and another corporation (corporation 2) owns, or other related corporations between them own, more than 50% of:

• the total beneficial interests in land subject to the fixed trust; or
• the total number of units held by the unit holders in the unit trust scheme.

Section 13G(5) will apply to land owned by:

• corporation 1 as trustee of the trust; and
• corporation 2 in its own right and not solely as trustee of a trust (discussed further below).

Where Section 13G(5) applies and there are 2 or more related corporations that both own land that are to be jointly assessed for land tax on the land pursuant to Section 13J, the corporate trustee cannot give notice of the unitholders/beneficiaries of the trust.

In this regard, Section 13G(5) expressly provides that where the provision is enlivened, such corporations are related corporations.

If Section 11 (and the further ability to give notice of the unitholders/ beneficiaries of the trust pursuant to Sections 12 and 13) were to instead apply, such that land owned by a trustee of a trust was instead to be assessed separately and not aggregated and assessed pursuant to Division 6, then the express inclusion of Section 13G(5) (so as to provide that corporations are related corporations in such circumstances) would be rendered ineffective.

Sections 13J(5) to (11) however set out the means by which a related corporation can be exempted from the application of Division 6.

However, where corporation 2 owns land as trustee of a trust, Section 11 will apply to any land corporation 2 owns as trustee of a trust, such that the land will not be included in the joint assessment for land tax.

In addition, as discussed above, if there is only one of any number of related corporations that owns land, land tax cannot be assessed pursuant to Section 13J.

As such, where Section 13G(5) applies and a corporation that owns land is not a related corporation of any other corporation that owns land, it will not be assessed for land tax pursuant to Section 13J, and instead only the owner of the land will be assessed.

One corporation is related to another corporation and that second corporation is, in turn, related to a third corporation, the first corporation and the third corporation will also be related. Therefore, all three corporations will be taken to be related.

Under Section 13I(1)(g), if a trustee holds controlling interests in 2 or more corporations on behalf of different trusts, those corporations are not related to each other only because of that control.

Company A, is a beneficiary/unitholder of a fixed trust/unit trust. It is also a related corporation of Company B. Both corporations own land.

If the trustee of the trust gives notification of the beneficial interests/unitholdings:

• the trustee of the trust will not be subject to the trust land tax rates; and
• as a notified beneficiary/unitholder, Company A will be deemed to own the trust land.

As Company A and Company B are related corporations, the land owned by the 2 related corporations (which includes all land held on behalf of the trust which Company A is the beneficiary/unitholder) is to be jointly assessed for land tax on the land as if it were owned by a single corporation.

Both corporations will also be jointly and severally liable for the land tax.

Under Section 13I(1)(a), corporations may be related corporations whether or not they own land in South Australia. Therefore, 2 corporations that own land in South Australia can be grouped with each other if they are related to a third corporation that does not own land in South Australia.

Under Section 13I(1)(b), a reference to the issued share capital of a corporation does not include shares which carry no right to participate in a distribution of profits or capital beyond a specified amount (that is, preference shares).

Under Section 13I(1)(c), any shares held or power exercisable by a person or corporation as a trustee or nominee for another person or corporation are taken to be also held or exercisable by the other person or corporation.

In terms of shares held or power exercisable by a natural person or corporation as a trustee for another person or corporation, the provision only applies to bare trusts. It does not apply to unit and discretionary trusts. As such, in terms of trusts, only the beneficiary(ies) of a bare trust will, in addition to the trustee, be taken to hold shares or exercise power in determining whether corporations are related corporations.

Under Section 13I(1)(d), any shares held or power exercisable by an excluded trust must be disregarded.

See the Guide to Legislation - Land Tax: Land Held on Trust for more detailed information.

Under Section 13I(1)(e), any shares held or power exercisable by virtue of a debenture, or a trust deed for securing the issue of debentures, must be disregarded.

Under Section 13I(1)(f), where shares in a company are used as security for a loan from a person who conducts a money lending business, the grouping provisions do not apply unless the money lender who obtains the security interest in the shares is associated with that company for example, as a director, secretary or related company if the money lender is a company.

Section 13I(1)(g) is discussed above.

Under Section 13I(1)(h), the composition of a corporation’s board is taken to be controlled by a person or another corporation if the person or other corporation, by the exercise of a power exercisable whether or not with the consent or concurrence of any other person, can appoint or remove all or a majority of the members of the board.

It is to be noted that Section 11 only applies where the land is directly owned by a trustee.

As such, Section 11 does not apply where a trustee owns shares in a corporation and that corporation in turn owns land (that is, Section 11 does not apply where a trustee indirectly owns land).

Under Section 13I(1)(e), any shares held or power exercisable by virtue of a debenture, or a trust deed for securing the issue of debentures, must be disregarded.

Under Section 13I(1)(f), where shares in a company are used as security for a loan from a person who conducts a money lending business, the grouping provisions do not apply unless the money lender who obtains the security interest in the shares is associated with that company for example, as a director, secretary or related company if the money lender is a company.

Section 13I(1)(g) is discussed above.

Under Section 13I(1)(h), the composition of a corporation’s board is taken to be controlled by a person or another corporation if the person or other corporation, by the exercise of a power exercisable whether or not with the consent or concurrence of any other person, can appoint or remove all or a majority of the members of the board.

Section 11 only applies to land owned by a trustee of a trust

It is to be noted that Section 11 only applies where the land is directly owned by a trustee.

As such, Section 11 does not apply where a trustee owns shares in a corporation and that corporation in turn owns land (that is, Section 11 does not apply where a trustee indirectly owns land).

Under Section 13J(3), the Commissioner of State Taxation (the “Commissioner”), may issue notices of assessment for land tax:

• to the related corporations jointly; or
• to the related corporations separately; or
• to any 2 or more of the related corporations jointly and the remainder separately.

Where related corporations are jointly assessed for land tax and one notice of assessment is issued to one of the related corporations, pursuant to Section 17(1), the burden of the tax is to be distributed between the related corporations in the relative proportions of the value of their interests in the land taxed.

Pursuant to Section 17(2), a related corporation who has paid tax in respect of land is entitled to recover from every other related corporation in respect of the same land a proper proportion of the amount paid.

Where related corporations are jointly assessed for land tax, one Land Tax Assessment is issued for the group and will be sent to the postal address deemed most appropriate by RevenueSA upon creation of the Corporate Group.

The Land Tax Assessment will specify each land owning related corporation, the land owned by the related corporations and the percentage interest each corporation has in the land taxed.

A Corporate Group can request to change the postal address that their Land Tax Assessment is issued to.

To change the Corporate Group’s postal address please use the online Lodge a Land Tax Query form and select the option ‘Update billing details for Corporate Groups’.

Under Section 13J(5), a corporation that is a related corporation of another corporation may apply to the Commissioner to be exempted from being a related corporation and to instead be treated as a single corporation for the purposes of assessment of land tax in relation to land held by the corporation.

Under Section 13J(6), the Commissioner may only grant an application if the Commissioner is satisfied:

• that the land is being held for the purpose of being developed as a residential development of more than 10 allotments or lots; and
• as to any other matters prescribed by the regulations.

The land, which can comprise one or more parcels of land (which, in totality, must be subdivided into more than 10 allotments or lots), must be held by the one corporation, as opposed to being held by multiple related corporations.

Under Section 13J(7), an exemption granted on an application will be for an initial term specified by the Commissioner in the instrument of exemption (which will be based on the expected development period but may not exceed a period of 5 years).

Under Section 13J(8) the initial term of an exemption may be extended for a further period if the Commissioner is satisfied that the development of the land is occurring over a reasonable period in the circumstances.

Under Section 13J(9), an exemption will cease if the Commissioner determines that:

• the development has been substantially completed; or
• the development has not been substantially commenced within the period of 2 years after the grant of the application (or such longer period as the Commissioner may allow).