New property in fixed unit trust

Fluid36,

In your original post you said you were buying in a unit trust (in NSW) for land tax reasons. Can I ask what land tax benefit you will be getting by having it in a unit trust?

Regards,

Jason

 

Sure Jason

Fixed trusts (which are normally unit trusts but not always) that have special clauses in them to satisfy section 3A of the LAND TAX MANAGEMENT ACT 1956 - SECT 3A get the land tax threshold in NSW.

more specifically:

"(3A) If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is the subject of the trust and, accordingly, the trust is taken to be a fixed trust."

They receive the land tax threshold in NSW because the unit holder / beneficiary is determined to be the owner of the land so essentially you are using up the threshold for the unit holder themselves.

Please see:

LAND TAX MANAGEMENT ACT 1956 - SECT 3A Special trust-meaning

The trust needs to be specifically setup for this.

Thanks

 

The unit holders have to be presently entitled to both income and capital subject to the trustee paying expenses first.

If the trust is set up this way the unit holders are basically considered the owners of the land for land tax purposes.

 

So my point was - what is the advantage (for land tax purposes) of purchasing in unit trust? Doesn't the land value just flows through to the individuals who own the unit trusts (as long as it meets the conditions to be a fixed trust). It would be just the same as purchasing in those names to start with.

I get there might be other advantages (partial transfer of property by selling units), multiple owners each owning a share but don't see the land tax advantage.

Jason

 

I have written a legal tip on this. Called something like that 18 advantages of of a unit trust.

 

Yes that is the point, you get the advantages of a unit trust that you mentioned but when it's fixed you ALSO get a land tax threshold, which a non fixed unit trust does not get.

 

Its not a double dip but it means that its not punitive and treated like a disc trust which is taxed on every dollar of land value.