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Residential Aged Care Facilities – Stamp duty considerations – Transfers of allocated places

By Julie McStay11 Nov 2015

The residential aged care sector is currently hallmarked by intense consolidation activity and the buying and selling of Residential Aged Care Facilities ("RACFs").

The interplay between stamp duty law and the unique statutory rights created by the Aged Care Act 1997 (Cth) (“Aged Care Act”) require careful consideration before entering into transactions for the sale of RACFs.

In the context of transactions involving the transfer of allocated places, the following stamp duty issues are worth noting:

Allocated places - these places may be a statutory right –the Aged Care Act creates a comprehensive bundle of valuable rights attached to allocated places. This is significant for transactional purposes because stamp duty laws often impose duty on the transfer of statutory rights. For example, the Queensland Duties Act 2001 imposes transfer duty on the transfer of a statutory business license used for carrying on the business.  Allocated places may fall within this definition and may therefore be dutiable property.

Provisionally allocated places – in rare cases, transactions may involve the transfer of provisionally allocated places (being allocated places which have not yet taken effect as the RACF is yet to be built). In those cases, (depending on the wording of the relevant stamp duty legislation) it is unlikely that transfer duty is payable because provisionally allocated places are not dutiable property. Under the Aged Care Act, no rights are attached to provisionally allocated places; only allocated places carry the rights to subsidy payments and to provide services.

Assumption of liability – a fundamental obligation of an “approved provider” of residential aged care services under the Aged Care Act is to refund the refundable accommodation deposits (“RAD”) balance to the resident or their estate when leaving the RACF. That obligation will, by statute, transfer to the buyer on the date that the allocated places in question are transferred. In view of this, careful consideration needs to be given to the price structure in the contracts and how that may affect duty liability.

Share sales – in most jurisdictions, there is no stamp duty payable on the transfer of shares (although landholder duty may apply in some cases). Accordingly, buyers of RACFs may avoid the complexities and potential stamp duty costs of acquiring the business assets by acquiring the shares in the company that is the approved provider and the business owner. The purchase of an entire company (rather than selected business assets) brings, of course, its own significant liabilities and complexities which need to be separately addressed for the purposes of deciding the appropriate transaction structure.  Click here to read an article that we previously drafted in regards to this topic.

If you are considering an acquisition of a Residential Aged Care Facility in the future and would like to discuss what structures and options might be best for you please contact Julie McStay, Director - Aged Care and Retirement Living Hynes Legal

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