VCAT Ruling: Implications for Property Developers & Fund Managers Raising Capital

Managing Principal
Property, Construction & Conveyancing
19 October 2023

Property developers and fund managers undertaking capital raisings for property acquisitions face uncertainty around potential double duty liability following a VCAT decision which confirmed investor liability for landholder duty. The ruling in Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2023] VCAT 634 has potentially wide-ranging implications for property developers, fund managers and investors alike.

The Diamond Creek entity

Oliver Hume Property Funds Group formed a special purpose entity, Diamond Creek Pty Ltd (Diamond Creek), to purchase land for development. It sought to raise capital through an investor subscription and created an “Information Memorandum” which was distributed to “sophisticated investors”.

Diamond Creek issued and offered 1.8 million $1 shares to 18 investors with investment parcels ranging from $50,000 to $200,000. No duty was assessed at the time of share subscription.

The Commissioner's Notice

By aggregating Diamond Creek investor acquisitions for the purposes of the Duties Act 2000 (“Act”), the Commissioner of State Revenue (Commissioner) considered a “relevant acquisition” had occurred.

The Commissioner issued a Notice of Assessment to Diamond Creek in the sum of $151,235, plus penalty tax and interest, with the penalty tax later removed.

The effect of the decision was each of the 18 shareholders were jointly and severally liable to pay landholder duty.

The 'landholder' provisions

VCAT considered the provisions of the Act at the time of the acquisitions and how duties were payable by “Certain landholders”. Under section 71 of the Act, ‘landholder’ includes a private company with land holdings in Victoria with a value of $1,000,000 or more.

Liability to pay duty arises “when a relevant acquisition is made” (section 77) and section 78 described a relevant acquisition as follows:

(1) … a person makes a relevant acquisition if

a) The person acquires an interest in a landholder

i. that is itself a significant interest in the landholder; or

ii. that amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by all or any of the following

A. the person; or

B. an associated person; or

C. any other person in an associated transaction; …

A “significant interest” (section 79) included an entitlement to 50% or more of the property of a landholder company (or 20% or more for a private unit trust). ‘Associated transaction’ (section 3) included an acquisition arising from substantially one arrangement.

While none of the 18 acquisitions reached the 50% threshold, the Commissioner aggregated the acquisitions to constitute a “significant interest” and “relevant acquisition” for which duty was payable.

The relevance of the Commissioner's Ruling

The Commissioner issued a Ruling in July 2012 (Ruling No. DA. 057) regarding “Associated Transaction”. The Ruling provided acquisitions of interests by independent members of the public would not be considered an “associated transaction” if made in response to a genuine public offer under a product disclosure or prospectus lodged with ASIC.

The Diamond Creek offer was different as it was not lodged with ASIC and was distributed to ‘sophisticated investors’, namely investors on the Fund Management Group’s database.

VCAT's findings

Diamond Creek argued the acquisitions should not be aggregated as the Information Memorandum and share offer were not limited to a database group but made to the public at large and investors had no connection apart from responding to the offer. Diamond Creek maintained there was no “material distinction” between a genuine public offer in the Commissioner’s Ruling and its offer.

The actions and motives of Diamond Creek and the investors were relevant for VCAT. VCAT found an “arrangement” between Diamond Creek and the shareholders. Upon acquisition of shares the investors had an interest in the development property and were bound by a statutory contract. The “oneness” or “unity” of purpose between the shareholders and Diamond Creek to undertake the “singular development project” [67] was also significant.

VCAT did not address the substance of Diamond Creek’s arguments about the Ruling, finding it had no force of law as the Commissioner was not authorised to offer such a concession.


Property developers and fund managers face significant uncertainty and imposing double duty makes raising capital more difficult.

The Diamond Creek matter involved 18 independent unrelated investors, yet VCAT upheld the aggregating of acquisitions. Given the generality of VCAT’s findings, many investor subscription offers risk having acquisitions aggregated. Establishing a “unity of purpose” is unlikely to be difficult when the common purpose of a residential development is sufficient. Establishing an “arrangement” does not appear onerous given VCAT found an offer and acceptance, acquiring equity and an interest in the development property, and being bound to a statutory contract were sufficient.

Property developers and fund managers no longer appear to have the comfort of the Commissioner’s Ruling. Rather than distinguish the Diamond Creek offer from the Ruling, the VCAT decision means acquisitions from genuine public offers may now be subject to aggregation.

Following VCAT’s decision, property developers and fund managers need to carefully consider, and plan, subscription offers involving land acquisition and capital raising. Organisations should also review previous subscription offers to raise capital as they may attract landholder duty.

The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only.

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