Land Tax for Property in Trust

Hi guys,

We are building 3 townhouses on a block and intending to move into one of them. They are all currently under our family trust with a corporate trustee. I was wondering with the unit i intend to move into, am i liable to land tax in the future? Or given it's a PPOR, we get some exemptions? Each townhouse is approx $1m in value after completion. We will most likely be staying there for a decade hopefully. I know if we transfer it back to personal names, there will be a stamp duty of $50k or so (ouch).

Had a read here by Terry

Tax Tip 69: Land Tax on Trust owned property in VIC and PPOR exemption

Does that mean Land Tax I can get exemption? Meaning $1m - $600k = $400k
$400k x 0.5% + 975 = $2975?

 

Depending how title is structured the full value of the property may be liable for land tax and no PPOR concession given. The issue for a trust holding a single title that is a PPOR may be exempt but holding a single title that encompasses three properties and only a portion is a PPOR means the exempt test fails. I am unsure they will allow a portion to be exempt. Call OSR ?

 

Thanks so much Paul, we have already sold 2 of the units. Sorry forgot to mention. So we will be subdividing the land soon as well. Will this change anything? Thanks!

 

Yes. The main residence exemption probably can NOT apply to that property at all and its likely not a CGT asset anyway. TD 92/135 is a simple but very relevant view of the ATO view that the property is NOT a CGT asset. Obviously affected by the factor that the trust owns the property but I argue that does more harm than good to your position.

TD 92/135 - Income tax: capital gains: is the main residence exemption relevant when the proceeds of sale of a dwelling are treated as income under ordinary concepts? (As at 12 May 2010)

AND......GST law may impact the first sale. The exception under the 5 year rule doesnt apply if you live in it yourself !! So if the trust sells in10 years could GST apply to the sale ? YES.....It most certainly could.

Did you get any tax advice before starting ? ie margin scheme, cost apportioning, etc...GST claiming credits etc

 

Thanks for the advice Paul. Appreciate it. I guess now it's a situation of whether to transfer it back to our personal names and pay the stamp duty OR leave it inside the trust and get hit with Land Tax every year.

Yes we did get advice. With the GST and margin scheme. We just weren't sure about the land tax bit and just wanted to understand a bit more!

 

Where is the land?

 

It's in Melbourne Victoria. Thanks

 

Doesn't my tip give you the answer?

 

Possibly - If two lots are sold it leaves one in the trust. Exempt ?