MEMO

To KuangYe CFO
From MinterEllison | Melbourne office
Matter KuangYe
3583197
Date 6 February 2018

Subject: Virtual Internship – Task 2 – Summary of the new AOS exemption

Following our discussion last week, please find below a brief summary of the Victorian absentee owner
surcharge (AOS) and potential exemption.

1. Absentee Owner Surcharge

1.1. The AOS applies to most types of Victorian land held by foreign-owned entities. The 1.5%
surcharge is calculated on the total taxable value of Victorian land owned by the foreign entity (i.e.

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the site value, or 'unimproved value' of the land).

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1.2. Recent changes to Part 1 of the Victorian Land Tax Act (2005) mean that, from the 2018 land tax
year, an exemption from the surcharge may be available in certain circumstances in respect of
land held by the trustee of an absentee trust. The Victorian Treasurer publishes guidelines in the
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Government Gazette (the Guidelines) which outline the basis on which exemption decisions are
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made.
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2. The new Treasurer's Guidelines

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2.1. Please find enclosed a copy of the new Guidelines as gazetted on 5 January 2018.
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2.2. It is not certain whether the Treasurer’s discretion would be exercised favourably in respect of
KuangYe's Victorian mine, however there are certainly some arguments that can be made which
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suggest that it is worthwhile making an application (particularly given the potential financial benefit
in the event that an exemption were obtained).
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2.3. At a very high level, the following factors will generally be considered to weigh in favour of the
granting of an exemption:
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(a) the smaller the nature, or degree, of the absentee beneficiary's interest in the trust (for
example, a foreign holding of 51% will be looked on more favourably than a foreign
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holding of 100%);
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(b) the smaller the absentee beneficiary's ability to, either directly or indirectly, practically
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influence the management and operation of the trust; and

(c) the less frequently an absentee beneficiary is seen to impact or affect the administration
or conduct of the trust.

Happy to discuss further once you have had a chance to consider the enclosed.

ME_145236762_1