Tax Tip 163: Trusts and Land Tax in South Australia

Tax Tip 163: Trusts and Land Tax in SA.


The land tax laws differ from state to state. Below are some points on the taxing of discretionary, and other, trusts that hold land in South Australia.


The relevant legislation is:
Land Tax Act 1936 SA
LAND TAX ACT 1936


Section 8B of the act makes land tax calculated on the aggregated value of all land owned by the owner, other land exempt land. LAND TAX ACT 1936 - SECT 8B


Section 13(3)(b) treats land owned by a person as trustee as separate to land owned by the same person in their own capacity.
LAND TAX ACT 1936 - SECT 13

Example
Dave owns his main residence in his own capacity (i.e. not as trustee) and has 3 investment properties and separately Dave is the trustee of the Dave Family Trust and Dave owns another 5 properties as trustee of this trust. (all in SA).

Dave will be assessed under 2 land tax thresholds here
a) In his personal capacity, and
b) As the trust

Dave’s personal owned properties will be aggregated together and the properties owned as Trustee will be aggregated together.

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Now for the good part. Where one trustee owns properties in separate capacities as trustee of 2 different trusts those trusts will be not be aggregated and will be entitled to separate thresholds where the land is not held on trust for the same beneficiaries

S13(3)(b) says “…the land will not be aggregated with the taxable value of other land owned by the same taxpayer unless the other land is held in trust for the same beneficiary”


Continuing our example
If Dave goes and sets up a new trust, with the same beneficiaries, that trust’s properties will be aggregated, however where the beneficiaries of the 2 (or more) trusts are not the same then each trust will get a separate threshold.

So before setting up the second trust Dave gets some legal advice and structures the trusts so that the beneficiaries are slightly different. A simple way to do this may be to add or remove or exclude a particular beneficiary or a class of beneficiaries such as ‘cousin’s children’.


What is important is the capital beneficiaries of the trust:
“The Commissioner will look at the beneficiaries who potentially qualify for a distribution of capital at the discretion of the trustee.”
Revenue Ruling LT004: Land Held on Trust https://www.revenuesa.sa.gov.au/rulings/LT004.pdf


Another way is to not have the same trustee for separate trusts – which you probably shouldn’t anyway.

Seek legal advice before trying this at home.


In summary

A trust will be able to attain a separate land tax threshold, to the trustee, in SA.

The same trustee may be able to attain separate land tax thresholds for separate trusts where the beneficiaries are not the same, and

Identical trusts with different trustees may be able to get separate thresholds.


And, most importantly – the laws can and will change in the future.