NSW Land Tax Unit Trust conversion

We currently have a unit trust where the unit holder is a hybrid trust. We are thinking about the scenario for the unit trust to be converted to a NSW Land Tax Unit Trust and the unit holder changed from the hybrid trust to husband & wife personal names.

There's one well-known firm that seems to be the only one out there that can do conversions of a non-fixed unit trust to a NSW Land Tax Unit Trust. I believe they can do this without making any stamp duty or CGT being triggered on the property held in the trust, is that correct? Do people here know roughly the costs to convert? Has anyone else done this in the past? Is that firm the only firm who can do this & do they accept anyone to contact them to do conversions?

 

On another question, I saw the term "family unit trust" mentioned somewhere. What does this mean? How is it different to a standard unit trust?

 

You could convert the trust to a fixed trust but the unit holders are still the hybrid trust.

 

Names don't mean anything unless this is defined in legislation. Are transferring to the land tax management act? Or to a product? If a product you will need to read the deed to compare differences.

I could call my discretionary trust a family unit trust but that doesn't necessarily mean it is either.

 

So it's not possible to change the unit holders to personal names after converting to a NSW Land Tax unit trust to benefit from not having to pay land tax in the future? I thought the whole point that firm was promoting it was that it fixes the issue of having to pay future land tax by making use of the people's personal land tax thresholds.

 

I don't know of a way to do it without triggering cgt. It may be possible without stamp duty.

Keep in mind the deductibility of interest issues.

 

No.
- Duty depends on the land location and value. In NSW land above $2m may still be dutiable.
- CGT is triggered.

You can only deal with the firm if you are a qualified adviser. I worked there.

 

I've done this. The unit holder remains the same but rather than having a trust threshold for land tax (ie from $1), the land tax assessment is based on the threshold of the individual/s who hold the units in the trust

 

And its very important that the individuals already have threshold available or there is no benefit for land tax. Its not a second threshold.

 

If the unit holder stays the same as a hybrid trust, wouldn't the outcome be exactly the same and of no benefit? You have a fixed unit trust and a hybrid trust as a unit holder there would be land tax from the first dollar?

 

There would be a difference as hte trust would be converting from a unit trust or a hybrid trust to a fixed unit trust. This would have different consequences in terms of land tax law, superannuation law and income tax perhaps.

 

With respect to superannuation it is important to note that a SMSF cant acquire an interest for a further three years due to impact of SISReg 13.22C/D.

....So many fine details when it comes to trusts + super

 

Legal advice is certainly needed, but I don't think this would be the case if the unit holder is not changing. The entity holding the units is not changing, only the terms of the top unit trust.

 

Paul, you mentioned you used to work there and said that CGT is triggered however their website homepage clearly says in bold red writing saying the below: Macquarie Group Services :: Trust Deeds | Superannuation Funds | Company Registrations | Financial Services - Order Deeds Online

• NSW - Discretionary Trust/Hybrid Trust conversion to Land Tax Unit Trust. No stamp duty. No CGT. Land Tax Savings. SMSF benefits.

Why would they be promoting that no CGT being payable if in fact it is payable?

 

The CGT issue is dependent on other factors. If a hybrid trust converts it may not be subject to CGT in some cases. A std unit trust also. Each case must be assessed. In many cases the costs outweigh benefits. Same as SMSF benefits may only apply if a SMSF is involved.