One of the vexing questions in duty laws is the scope of the definition of "land". Since land is a significant part of the duty base, either directly or indirectly via "landholder" rules, the issue is seen as fairly important for both taxpayers and the various State revenue offices. Similar problems of analysis may arise in respect of the non-resident CGT rules in Division 855 of the Tax Act, and also in the interpretation of double tax agreements that might limit Division 855 in some cases.
It is common for the statutory definition of land to include various mining tenements (and this is the case not only for State duty purposes, but also for Division 855 too). So the recent decision of Commissioner of State Revenue v Abbotts Exploration Pty Ltd  WASCA 211, at first glance holding that an exploration licence under the WA Mining Act was not dutiable, came as something of a surprise.
Rights in an exploration licence
The matter was a landholder duty case, on appeal from the Western Australian State Administrative Tribunal. The Tribunal had been asked to determine whether the rights held by a subsidiary, in relation to four exploration licences were “land” within the meaning of section 3 of the Duties Act 2008.
“Land” as defined includes “any estate or interest” in “land” or in a “mining tenement”.
Abbotts Exploration Pty Ltd was a controlling shareholder of Anuman, the company that had rights in relation to the four exploration licences. While Anuman did not have legal title to the four licences, it had acquired certain rights such as the right to mine and a requirement that the interest in the tenements be transferred to the company by way of an option deed.
If these rights acquired by the exercise of the option deed and other agreements was such that Anuman had “an estate or interest in a mining tenement”, it would be considered to have a beneficial interest in the land. This beneficial interest would make Abbotts, as a controlling shareholder, a landowner for the purposes of the Duties Act 2008 and thus make them liable to pay duties on the four tenements.
The Tribunal held that the nature of the option deed and other agreements was such that upon the exercise of the option, the beneficial interest in the exploration licences transferred to the company.
Since Anuman was beneficially entitled, it had an “interest” in a mining tenement and was therefore considered to be a “landowner” under the Duties Act. Thus Abbotts was a landowner liable to pay duties on the tenements.
However, at the time when Abbotts acquired Anuman, the owner of the fourth tenement was prohibited from transferring or otherwise dealing with that tenement without the prior written consent of the Minister, due to section 64 of the Mining Act. That provides that during the first year of the term for which an exploration licence is granted, a legal or equitable interest in the licence cannot be transferred or otherwise dealt, unless there is prior consent of the Minister.
As the fourth tenement was still in the first year of its term, and no written consent had been obtained from the Minister, no beneficial interest could have been conferred with regards to the fourth tenement.
The Tribunal therefore held that although Anuman did have rights in respect of the fourth tenement at the relevant date, those rights could not have been proprietary in nature and instead could only have amounted to personal rights. Thus the rights Anuman had under the fourth tenement did not constitute an estate or interest in “land” for landholder duty purposes.
Was the fourth tenement “land”?
On appeal, the Commissioner of State Revenue asked the Court to reconsider the question of whether the fourth tenement was “land” for the purposes of the Duties Act 2008.
The Court upheld the Tribunal’s decision, finding that at the relevant date Anuman did not have an “estate” or an “interest” in the fourth tenement.
It found that while “estate” and “interest” are not defined in the Mining Act, they take their meaning from the Duties Act which denotes some sort of proprietary right.
The option deed and other agreements were ineffective to create, transfer or confer on Anuman any proprietary rights over the fourth tenement. This was because section 64 of the Mining Act prohibited the transfer of any legal or equitable interest in the mining tenement from being transferred in the first year of the term of the tenement.
Importantly, it was noted that while this section prevented the conferral or any legal or equitable interest, it did not prevent the transfer of mere personal rights. As these personal rights were not proprietary rights at the relevant date, it was held that the Anuman did not have any estate or interest in the mining tenements.
Thus, the interest in the tenement was not “land” for the purpose of section 3 of the Duties Act, and no landholder duty was payable on the fourth tenement.
Implications for mining
This decision shows that interests in exploration licences (or presumably in other interests in land) will only be dutiable where they confer a legal or equitable interest on the taxpayer. This may be so irrespective of possible applications of extensions of the concept of land in various Acts Interpretation Acts.
Thanks to Fiona Toohey for her help in writing this article.