Land Tax, Joint Ownership v Tenants in Common

Was speaking to my lawyer the other day on an estate issue, and the question of the pros and cons of joint v tenants in common came up.

A couple of things occurred to me. First, if land is owned jointly with wife, you can change the title arrangement from joint ownership to 50/50 tenants in common without incurring any CGT or stamp duty (it was a side conversation so I hoping I understood this point correctly).

So, if you can make the change without incurring CGT or stamp duty, got me thinking whether there are some tax benefits in doing so. And in particular, can you reduce land tax by making the change?

Land tax arrangements are different in each state, so this is not a straightforward issue, and land tax calculations are complex (at least mine are in Victoria).

Has anyone looked at this in any detail?

 

For land tax purposes JT is considered to be TIC in equal shares.

So it shouldn't make any difference, for land tax, in VIC, NSW or QLD and prob not anywhere else.

 

Thats a good point but worth explanation

1. For estate planning (wills etc) JT and TIC 50:50 are NOT the same. This is very important to understand. Changing from JT to TIC means the property will pass through the deceased estate - the LPR. A JT will not.
2. For a deceased estate a JT will bypass a will BUT will have no effect for land tax since land tax treats TIC and JT exactly the same

I have encountered many who seek to change from JT to TIC which is a legal issue (only) but it can lead to tax issues on death for the acquisition that is triggered - Thtas likely no issue for spouses. However where people consider non-spouses that can also create some later CGT transfer issues so legal + tax advice is important.

The other area where land tax and income tax can overlap with a degree of opportunity is the NSW land tax rule which permits a SINGLE owner of property to change title to JT or 50/50 TIC while the property is the PPOR of the owner and occupied by BOTH parties (even if its a brief period of time). This can produce refinance and other benefits for land tax and future CGT BUT does trigger a CGT event on the changed ownership which can sometimes be exempt.

 

If a property is owned JT by a discretionary trust and a SMSF with only one member, will the part owned by the SMSF automatically transfer to the discretionary trust, bypassing the full stamp duty, on the death of the SMSF member/‘demise’ of the SMSF?

 

no. the asset is held on trust by the trustee of the SMSF so it doesn't pass on the death of the member.

 

Thanks, Terry. If I replace the SMSF with an individual, then the half of the property will pass through to the Trust (?). Does the transfer have to go through Probate? The background to my question is how to avoid land tax when alive and how to avoid contest of will when dead

 

If a joint tenancy it would pass on the death of the individual, bypassing probate.
This won't avoid a challenge to the will or a family provision claim though, especially under NSW law - but make it less likely perhaps.
Seek legal advice.

 

Can the transfer of shares in a trustee company be challenged given that it also changes control of the family trust?

 

A transfer of shares doesnt necessarily mean control changes. What state? Qld is very different for example

 

Certainly can.