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NSW Land Tax Unit Trust

Discussion in 'Accounting & Tax' started by Hedgy, 27th Jun, 2016.

  1. Hedgy

    Hedgy Well-Known Member

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    Hi All,
    Looking for a recommendation. I understand that in NSW it is possible to convert a discretionary trust (which holds an IP) to a NSW land tax unit trust. Clearly, this needs to be done carefully for obvious reasons but I was given (by a very reputable accountant) the contact details of a firm in Sydney that has done this on may occasions. My problem is this: business must be good for said firm in Sydney as despite me making several calls chasing them up they continue to promise to get back to me and I never get the promised returned call. Anyway, I'm sick of waiting for them so just wondering if anyone here has had first hand experience with this and can recommend anyone--preferably someone that returns promised calls:)
    Thanks,
    Hedgy.
     
  2. beachgurl

    beachgurl Well-Known Member

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    I recently did this with likely said firm. Terrible to deal with. My accountant referred me and even they couldn't get a response
     
  3. Hedgy

    Hedgy Well-Known Member

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    well now at least i know my dealings with them weren't personal:)
     
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  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Macquarie Group Services and Chris Batten ??

    I used to work there and I cant get progress. Its more frustrating for me.
     
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  5. neK

    neK Well-Known Member

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    What is a Land Tax Unit Trust?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A fixed trust in which the unit holders are considered owners for land tax purposes.
     
  7. Hedgy

    Hedgy Well-Known Member

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    In NSW if you hold a property(ies) in trust it provides a more beneficial position (land tax threshold) when it comes to land tax.
     
  8. neK

    neK Well-Known Member

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    This is what I got from the Trusts | Office of State Revenue

    The following trusts do receive the land tax threshold:
    • fixed trust
    • A superannuation trust is a complying superannuation fund
    • A trust created by a will is entitled to the threshold. However, if the trust is a testamentary discretionary trust, it will become a special trust 2 years after the date of death of the testator
    • family unit trust is a trust that held land at midnight on 31 December 2005 with a taxable value of $1 million or less
    • concessional trust
    • charitable trust

    The land tax threshold does not apply to special trusts.

    My understanding has always been that Trusts DO NOT get the threshold (unless its one of the trusts mentioned above). If not in that category, it is a "special trust" where no threshold applies.

    But as @Terry_w, a Land Tax Trust is a Fixed Trust.
    Do these trusts get their own threshold and completely separate from existing holdings in your personal name?

    For example (all properties owned in NSW),
    Property1, Value $400k, owned by Husband
    Property2, Value $400k, owned by Spouse
    Property3, Value $400k, owned by Fixed Trust A
    Property4, Value $400k, owned by Fixed Trust B

    Would this mean I would not need to pay Land tax at all?
     
    Last edited: 28th Jun, 2016
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No a fixed unit trust doesn't get its own threshold for land tax. It is just that the unit holders are considered owners so if they are individuals or a company they will get to use their existing threshold (not an extra one).

    If the unit holder is a discretionary trust then there would be no threshold.
     
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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would all depend on who the unit holders are of the fixed trust. If either husband or wife land tax threshold would be exceeded.
     
  11. neK

    neK Well-Known Member

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    Thanks for clearing that up.

    So if that is the case, assuming Husband and Spouse already own existing property independently and just below the threshold, what benefit would it be to move from discretionary trust to a fixed trust ? Wouldn't the outcome be pretty much the same?
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If the unitholder is a disc trust then the unit trust may be exempt if the value of land is under the threshold. However a secondary assessment issues to the Disc trust and is fully taxable. A unit trust does get a threshold but it is necessary to consider the unitholders as there is no double dip.
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    It could be identical or could be cheaper. Perhaps the threshold ? Each situation can be different. Perhaps the benefit of the unit trust isnt just land tax !! and could include:
    - Refinancing principle
    - Ability to change unitholdings
    - SMSF strategy
    - Ability for unitholders to hold a fixed right to income and capital gains
    - Neg gearing v's say a disc trust
    - Co-ownership of some property by a SMSF or other related parties etc
    eg : One unitholder can be neg geared and another +ve geared. Units trusts arent a land tax strategy on their own.
     
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  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No land tax benefits.
     
  15. Whiteman

    Whiteman Well-Known Member

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    Hello all

    I am currently affected by this problem, in that i have a discretionary family trust and i am not allowed to claim the threshold on the only property i hold in NSW. Did we get an answer to the OP's question repeated below?

    "I understand that in NSW it is possible to convert a discretionary trust (which holds an IP) to a NSW land tax unit trust."

    If it is possible without creating stamp duty or CGT event who can do it?

    Thanks for any help.
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes it is possible to convert.

    I dont know how it would be possible to do without triggering either duty or cgt but some do.

    If it is possible you have to ask what the other consequences would be. Deductibiluty of interest, asset protection, estate planning for exemple.
     
  17. Whiteman

    Whiteman Well-Known Member

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    Ok thanks for the tips Terry.

    If it is possible without duty or CGT ill look further into it, if anybody else has further advice?

    Failing that ill just buy another property in NSW correctly this time and use up the threshold on that one.
     
  18. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Chris Batten says it can be done without triggering stamp duty or CGT. He is the only one I am aware of doing this.

    Expect lead times of 3 months or more. Getting onto him is near impossible.
     
  19. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Not near impossible. It is impossible. And I worked there.
     
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  20. Hedgy

    Hedgy Well-Known Member

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    Beware anyone going down the path at looking into converting a discretionary trust to NSW LT trust.It is far from straightforward and the CGT implications are certainly not without risk. I was going to convert but having had some great advice on the pros and cons I am not comfortable with the risk and am sticking to my discretionary trust. Anyone that tells you this is a straightforward conversion with no risk clearly hasn't looked into it.
     
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