This article is intended as a general summary only – we recommend that landholders seek personal professional advice for their own unique circumstances. Additional information can be found at Revenue SA:

https://www.revenuesa.sa.gov.au/taxes-and-duties/land-tax/land-tax-changes

South Australia is bracing for the biggest land tax reform in years.  If you own property that you don’t live in – this will affect you.  After a year of political wrangling, the goal posts have been locked in.

How land tax is levied will depend on how each parcel of land is owned.  The most significant change will be to land owned in trust which will now be subject to new higher rates of tax.  The new trust rate is set at 0.5% higher than the general land tax rate, capped at the top marginal tax rate of 2.4%.

There is, however, a big ‘out’ which is why accountants and land holders around the state are scrambling to get their paperwork in order.

Trustees have the option of nominating a ‘designated beneficiary’ for each trust.  The land held in that trust will then be taxed at the general rate (ie. 0.5% lower than the trust rate).  That land will be aggregated with any other land held by the designated beneficiary for land tax calculations.

Great care needs to be taken in the choice of a designated beneficiary.  Under the current rules, the nomination can only be changed if that nominee dies or upon application to the Commissioner following a matrimonial or de facto property settlement.  Any other withdrawal of the nomination will result in the application of the higher tax rate.

From a succession planning perspective then, this nomination is crucial.  It could present a great opportunity to nominate a beneficiary who may not hold or anticipate holding other land.  But it could also present a trap – for older trustees who are hoping to retire from the trust and renounce their roles as beneficiaries in order to claim the pension in the future.  We recommend seeking professional advice if you are considering making a nomination.

I am the executor of a deceased estate: Am I affected?

Short story: yes.

The new rules include ‘administration trusts’, namely land held by an executor on trust for a deceased estate within the first three years of the deceased’s death.  Administration trusts are exempt from land tax, but Revenue SA still needs to be notified about them.  The deadline for notification is one month following the Grant of Probate or letters of administration.

Importantly, administration trusts expire after three years.  So if the deceased estate you are acting for is administered beyond that point, the normal trust rules will apply.  We recommend seeking professional advice about your responsibilities as an executor.

What do I need to do now?

The deadline for trustees to notify Revenue SA that land is held in trust is Friday 31 July 2020.  Remember – every trustee and investment land owner in the state has the same deadline, so don’t leave this to the last minute – seek professional advice now.

If you think you need some guidance or advice go to:

http://ezralegal.com.au/taxation/

Or call us on 08 8231 6100 or email reception@ezralegal.com.au.

We look forward to hearing from you soon.

Kind Regards,
Michael Fabbro, Principal