Evidence for land tax foreign surcharge significant contributor exemption application

An entity is an individual or company registered under the Corporations Act 2001 (Cwlth).

For the LTFS exemption, the applicant would be a landowner that is considered a foreign company or a trustee of a foreign trust for land tax purposes.

Where a landowner is a trustee acting in a nominee or custodian capacity for regulatory compliance purposes, the nominee or custodian will be looked through and eligibility for the exemption will be determined by reference to the activities of the next-level trustee.

Corporate group tracing is available for most of the eligibility requirements in the ruling.

• A parent entity is an entity that directly owns at least 90% of the issued shares in and has voting control over another entity.
• A subsidiary entity (first entity) is one in which another entity directly owns at least 90% of issued shares and has voting control over the first entity.
• Voting control means that an entity is in a position to cast, or control the casting of, 90% or more of the maximum votes that can be cast at a general meeting of a company (other than under a debenture or trust deed securing the issue of a debenture).
• All parent and subsidiary entities constitute a corporate group.
• Each entity within the corporate group is a group entity.

The circumstances and activities of a group entity can be taken into account when considering whether relevant requirements are satisfied. Where this happens, the entity is referred to as a ‘relevant group entity’.

Supporting documentation includes:

• a corporate structure diagram of the corporate group confined to entities that are directly connected by at least 90% share-ownership and voting control (including identifying the entity seeking the exemption and the other group entities)
• ASIC records confirming the entity’s connection with the parent entity that directly owns at least 90% of shares in it and any other entity on being relied on via corporate group tracing, in the 12 months before the liability date.

Once an exemption from LTFS is approved, it applies to all of the entity’s taxable land in Queensland in respect of the financial year for which the exemption is sought. However, the exemption can continue to apply for subsequent financial years without the entity having to lodge a new application each year, provided certain conditions are met. For this to happen, the entity must lodge—at the beginning of each financial year—a statutory declaration confirming that no notifiable events have occurred and that the entity will remain eligible for the exemption.

See the public ruling (LTA000.6) for the definition of ‘notifiable event’.

If the entity has been pre-approved or approved for an exemption and a notifiable event occurs, the entity must notify us of the event within 28 days after the event happens.

We have used future dates in these examples.

An entity can apply for pre-approval of the significant contributor exemption for a financial year if one of the following applies.

• The entity has previously been approved or pre-approved for the significant contributor exemption or LTFS ex gratia relief.
• A group entity in a corporate group has been approved for the significant contributor exemption, while a member of the group, and the entity is the parent or a subsidiary of a group entity when the liability for land tax arises.

If pre-approval is given, it will continue to apply until a notifiable event occurs.

• Prior pre-approval or approval. An entity is not eligible for the significant contributor exemption if it has been pre-approved or approved for the large developer exemption.
• Approval of build-to-rent (BTR) concession. An entity is not eligible for the significant contributor exemption if a concession from LTFS for an eligible BTR development has been applied to its land.

Provide an ASIC historical extract showing the entity’s principal place of business and a copy of the entity’s lease or title documents showing the location of the head office or the principal place of business.

Generally, we do not accept an accountant, solicitor or agent’s office address as evidence of the entity’s head office or principal place of business.

If the address listed on ASIC is leased or owned by another entity, advise of the relationship between the entities.

Corporate group tracing is not available for this requirement.

You’ll need to provide evidence of significant Australian management staff and office presence.

Significant management staff

Significant management staff (i.e. directors and managers) in Australia must be employed by the entity, or by a relevant group entity where corporate group tracing applies. The employment arrangements must exist at the time that liability arises.

• Entity directly employs significant management staff—evidence includes:
  • a diagram of the entity’s organisational structure outlining the entity’s management staff in Australia
  • information outlining how the management staff is engaged and the types of management functions they undertake in relation to the entity’s commercial activities
  • evidence that the management staff is Australian based, such as an ASIC extract or corporate documents
  • corporate documents, such as
    • any relevant management or service agreements
    • prospectus, project documents, brochures or annual reports that outline the entity’s presence in Australia.
• Relevant group entity in a relevant corporate group employs significant management staff—evidence includes:
  • the name and ABN of this entity
  • the entity’s ASIC historical extract
  • a corporate structure diagram of the corporate group confined to group entities (including identifying the entity seeking the exemption and the employing relevant group entity)
  • information confirming that these connections and arrangements occurred in the relevant period
  • employment details and employment evidence such as examples of contracts, which confirm the arrangements and the periods in which they were entered into and operated for. (See ‘Employs Australian citizens or permanent residents’ for more detail.)

Significant office presence

Provide evidence the entity has significant office presence in Australia including:

• the number of offices located in Australia
• the functions and activities being undertaken in the offices
• how those functions and activities relate to the entity’s commercial activities in Australia.

If the entity’s principal place of business address recorded with ASIC or other offices are leased or owned by another entity, also provide the details of the relationship between the entities.

If the address belongs to entity’s solicitor or accountant for instance—and the entity does not have any other location for its business—it will likely not be considered to have a significant office presence in Australia unless alternative evidence to this effect can be provided.

Entity as employer—evidence includes:

• payroll data that identifies the total number of employees based in Australia and the number that are Australian citizens or permanent residents
• an employee register showing the residence of the employees and whether they are Australian citizens or permanent residents
• financial statements, such as profit and loss statements, confirming employee expenses
• a sample of employment contracts between the entity and its employees, as well as information confirming that the employees are Australian citizens or permanent residents.

Group entity as employer—evidence includes:

• the name and ABN of the employing entity
• the employing entity’s current ASIC historical extract
• a corporate structure diagram of the relevant corporate group that identifies the entity seeking the exemption and the employing entity
• information confirming that these connections and arrangements occurred in the 12 months prior to, and including, the liability date.

We have used future dates in this example.

Entity carries on business in Australia—evidence includes:

• a list of business activities conducted in Australia in the last 5 years and evidence of this business activity
• evidence of expenditure on business activities such as invoices from third parties relating to the supply of goods or services in the relevant period
• financial or corporate documents, such as
  • • annual reports
    • profit and loss statements
    • wage or salary expenditure
  • strategic plans
  • incurred and forecast expenditure
  • other corporate documents outlining the above.

Group entity in the relevant corporate group carries on business in Australia—evidence includes:

• the name and ABN of this entity
• this entity’s current ASIC historical extract
• a corporate structure diagram of the relevant corporate group confined to group entities (including identifying the entity seeking the exemption and the entity carrying on the business)
• ASIC historical extracts of all group entities that traces the entity seeking the exemption to this entity via corporate group tracing
• information confirming that these connections and arrangements occurred in the 12 months before the liability date.

‘Primarily’ means chiefly or principally. Where decisions are made by multiple entities across different jurisdictions, an assessment must be made as to whether those decisions that are made by management or employees in Australia are the primary decisions about the entity’s business and operations in Australia. Generally, where more than 50% of decisions are made by management or employees in Australia, this would prima facie suggest that the requirement is satisfied. However, this is not an absolute rule; and the assessment must be made on a case-by-case basis.

Entity

To prove the entity’s management or employees in Australia primarily make decisions about the entity’s business and operations in Australia, include:

• memoranda executed by or on behalf of the entity, stating the powers of the entity’s directors, managers and key personnel in relation to Australian participation
• organisational structure identifying location and responsibilities of staff involved in making strategic or key operational decisions
• copies of minutes of meetings conducted in Australia that show Australian decision making in the 12 months before the liability date. (The meeting minutes must confirm the names of the people in attendance and the decisions being made by those people.)

Group entity

To prove the management or employees of a group entity primarily makes decisions about the entity’s business and operations in Australia, include:

• the name and ABN of this entity
• this entity’s current ASIC historical extract
• a corporate structure diagram of the relevant corporate group confined to group entities (including identifying the entity seeking the exemption and the entity that conducts its commercial activities in Australia and primarily makes decisions about the entity’s business and operations in Australia)
• ASIC historical extracts of all group entities that trace the entity seeking the exemption to the relevant group entity via corporate group tracing
• information confirming that these connections and arrangements occurred in the 12 months prior to, and including, the liability date.

We have used future dates in this example.

You can provide relevant supporting documentation when lodging your exemption application; for example:

• where approval was required, a copy of the entity’s FIRB approval or no objection document
• where approval was not required, the reasons why and any information from FIRB from the time of acquisition supporting these reasons
• where approval has not yet been received, a copy of the FIRB application (together with supporting documents)
• copies of any other correspondence with FIRB concerning the entity’s compliance
• details regarding how any previous non-compliance issues have been addressed.

We will assess whether legal and regulatory requirements have been met by the information already available to us. If this is not possible, we will request supporting documentation.

You can provide relevant supporting documentation when lodging your exemption application; for example:

• a written statement confirming whether regulatory requirements in Australia (if applicable) or another relevant jurisdiction (if any) have been complied with
• where the entity or the group entity is listed on a stock exchange
  • the stock exchange on which it is listed
  • the name it is listed under
  • any unique code used to identify the entity on the exchange
• the entity and the group entity’s financial or annual reports required to be lodged with ASIC (or equivalent entity) for the last 2 years (If the entity or the group entity have been registered for less than 2 years, provide a copy of the entity’s financial report and any other reports lodged.)
• if the entity or the group entity is under the control of another entity, consolidated financial reports or annual reports of the controlling entity required to be lodged with ASIC (or equivalent entity) for the last 2 years
• if relief from lodgement of financial reports has been granted by ASIC, evidence of this
• if the entity or the group entity is not registered with ASIC, any other documents (including financial reports or annual reports) for the last 2 years that the entity and the group entity are required to prepare by the law that applies in the entity’s place of origin. (If any document is not in English, provide a certified translation of that document into English.)

If you (the entity and/or the group entity) have had previous dealings with us, we will consider whether the entity and the group entity have been subject to, or are currently dealing with, our audit or collection activity. To help with this process, you should provide relevant QRO client numbers.

If any revenue laws have not been complied with, provide confirmation that any previous non-compliance issues have been addressed.

Typically, we only consider information relating to the 12 months before the liability date; however, we may consider the entity’s and the group entity’s historical and current non-compliance.

If you have entered into a payment arrangement with us, this will not be treated as non-compliance, provided you meet your responsibilities under the arrangement.

We have used future dates in this example.

In the 12 months before the liability date—or as part of committed future commercial activities over a 12-month period from the liability date—the entity must be:

• employing 75 or more full-time equivalent employees (not labour hire or contractors) in Queensland

or

• incurring expenditure in Queensland of more than $20 million annually; comprising Queensland payroll tax and land tax liabilities, expenditure on Queensland goods and services, and wages paid to Queensland residents.

The local workers engaged must be employees (not labour hire or contractors) in Queensland. The number of workers is to be counted in terms of full-time equivalents (FTEs). If an entity or a relevant corporate group do not employ workers directly, this requirement will not be satisfied.

Evidence includes:

• payroll data (including the total number of employees based in Australia and the number of employees engaged in Queensland)
• evidence of number of employees
• payroll summary outlining the list of employees and their employment status (such as full time, part time or casual)
• a sample of employment contracts confirming the employment of the Queensland FTE in the period under consideration.

You must provide evidence that more than $20 million has been expended on Queensland resources by the entity or a relevant corporate group in the 12 months before the liability date (unless averaging or committed future commercial activities apply).

The expenditure that can be included is ongoing; we will generally not accept one-off payments when considering if the entity satisfies this requirement. Further, evidence must specifically relate to the entity’s contributions or that of a group entity if relying on corporate group tracing to meet this requirement.

• Expenditure that can be considered as ongoing expenditure on Queensland resources:
  • wages
  • goods and services
  • state taxes such as payroll tax and land tax
• Expenditure that cannot be considered:
  • capital expenditure (including renovation and maintaining an asset)
  • transfer duty payments
  • finance and borrowing costs incurred in holding an asset
• Evidence to be provided:
  • details of the dollar value spent on contracts for materials and services with Queensland contractors and suppliers
  • details about the nature of the expenditure (operational, capital and how it contributes to the Queensland economy), and the period which the expenditure relates
  • details as to whether the expenditure primarily relates to the entity’s business
  • details regarding the entity’s role in the expenditure, such as whether
    • the entity, or a group entity, directly engages the supplier or directly acquires the goods to which the expenditure relates
    • if the entity (or a group entity) engages an intermediary, and the intermediary engages a supplier or acquires the goods. If this is the case, provide details regarding the intermediary and its relationship to the applicant
  • copies of
    • contracts
    • quotes
    • invoices for materials or services with Queensland suppliers, which confirm the client and the supplier and an invoice date
    • information confirming that your tax liabilities for payroll tax and land tax (if applicable) have been paid
    • details of Queensland contractor and supplier expenditure incurred in Queensland
    • audited financial statements or annual reports (including profit and loss statements, balance sheets and statements of cashflows) outlining expenditure that can be identified as project-specific or Queensland-specific
    • payroll data that includes the total wages paid to Queensland residents

We have used future dates in these examples.

Committed future commercial activities are primarily considered if the entity is unable to meet the requisite contribution level in the 12 months before the liability date. The entity may provide evidence of its committed future commercial activities over a 12-month period from the liability date.

Evidence includes:

• executed contracts and agreements, with project status and projected costings
• regulatory approvals (e.g. environmental approvals, development approvals, licences and permits)
• committed business plans
• committed recruitment plans (including number of staff to be employed, total wages to be paid and expenditure on local resources)
• evidence of capital raised.

If the entity or the relevant corporate group holds land passively as a landlord or property investor (i.e. its business in Queensland is wholly or primarily connected with the ownership, sale or purchase of land), the entity is not considered to be undertaking commercial activity for the purposes of the ruling.

Generally, if land is held passively, any employees engaged or any expenditure made as part of the business will not be counted towards the significant contribution requirement.

Provide the following supporting documents:

• title documents showing ownership of relevant land and any titles searches that confirm that a lease has not been granted over the land
• evidence of commercial activities undertaken on the land that are not in relation to holding the land as a passive landholder
• financial reports, profit and loss statements, annual reports, strategic plans, corporate documents or website information detailing nature and extent of commercial activities in Queensland
• evidence of any property development activities in Queensland
  • details regarding whether the entity continues its development during the relevant periods
  • how it intends to hold the land following the development’s completion (e.g. clarify if the entity will lease or dispose of the land)
• details of the nature of the entity’s business and the entity’s role in the business, such as
  • if the entity directly operates the business or does it engage an intermediary
  • if an intermediary is engaged, details regarding the intermediary and its relationship to the entity.

For commercial activity in non-metropolitan areas and/or particular industries, the Commissioner may approve commercial activities as a significant contribution—or an entity or relevant corporate group as a significant contributor—if the entity (or group) meets all other requirements for the LTFS exemption:

• the commercial activity in the context of the population size, demographics and activity in the area, and/or size and maturity level of the industry
• the nature of the area and/or industry
• the contribution that the commercial activity makes to the area and/or industry (e.g. whether the entity is a major employer in the area; whether the industry or activity would exist in the absence of the entity)
• any other relevant factors.

Provide evidence including:

• the nature of the commercial activities
• the region or industry in which the commercial activities are undertaken
• economic and social impacts of the commercial activities in the region or industry
• factors specific to the context of the region or industry, such as
  • population size and demographics of the region
  • activity in the region
  • whether the activities contribute to housing stock and infrastructure and how this contribution is significant to the local community
  • whether the entity is the major employer in the region
  • whether the industry or activity might not exist in the absence of the entity
• whether, in the absence of the commercial activities, such outcomes for the region and/or industry would otherwise be likely (e.g. the number of other commercial operators in the same market)
• strategic plans, council approvals and stakeholder supporting statements
• regional or economic plans that identify such commercial activities as a significant focus for the region or industry.