The Land Tax (Miscellaneous) Amendment Act 2019 (SA) (the Amending Act) has now been enacted and introduces progressive changes to the Land Tax Act 1936 (SA) (the Land Tax Act) between 30 June 2020 and 1 July 2022. The changes will affect, among other things, the rates of land tax, the relevant site value thresholds, the introduction of trust land tax rates and wider aggregation provisions, and the expansion of certain land tax exemptions.
From 1 July 2020, there are to be new land tax rates and increased thresholds. For non-trust held land, those changes are as follows:
Trustees that hold land on trust may be subject to higher surcharge rates of land tax. In some circumstances, the trustee of a trust may be able to nominate a beneficiary or unitholders of the trust, thereby resulting in the lower, standard, land tax rates applying to the trustee. The nominated beneficiary/unitholders will also be taxed in respect of the land, with a rebate available for tax paid by the trustee. Importantly, if the nominated beneficiary or unitholders are the owner of any other land, land tax will be calculated on the aggregated site value of all land legally owned by that individual. Importantly, nominations can generally only be made once, therefore careful consideration should be had to whether they make a nomination and, in the case of a discretionary trust, who to nominate.
If no beneficiary or unitholders are nominated, the trustee may be subject to higher trust rates of land tax as follows:
The effect of the increased rates is to impose a surcharge on land held in trusts. In the 2020/21 financial year, the maximum surcharge for trust land is $6,498. From the 2022-23 financial year, the maximum surcharge for trust land will increase to $9,165.
The Amending Act also amends the aggregation provisions contained in the Land Tax Act to function similar to the aggregation laws in the Victorian land tax legislation. The amended aggregation provisions are intended to collate all land (including interests in land) that is owned by the same taxpayer and combine their site value to calculate a combined total land tax liability for that taxpayer.
Where land is held jointly, land tax is assessed to the owners jointly in the first instance, with each owner then being taxed again on their proportionate interest in that land in addition to any other land or interest in land owned by that taxpayer, subject to a rebate for the taxpayer’s proportionate liability for land tax assessed to the owners jointly.
The existing trust aggregation provisions have been removed, and land held in a trust will only be aggregated with other land held in the same trust, i.e. land held in 2 or more separate trusts will not be aggregated. As noted above, however, where the trust nominates a beneficiary or unitholders, the beneficiary or unitholder’s resulting interest in the trust land will be aggregated with any other land, or interest in land, held by that beneficiary or unitholder.
Much broader aggregation provisions apply for companies with land held in different companies now subject to aggregation if the companies are related or otherwise controlled or deemed to be controlled by the same person or group of persons. As a result, land that is owned by corporations deemed related will be jointly assessed for land tax as if the land were owned by a single corporation and all of the related corporations are jointly and severally liable for the tax so assessed.
The changes to the aggregation provisions are likely to catch out many taxpayers, and therefore careful consideration is required when determining whether these provisions apply.
Land that was previously exempt from land tax, e.g. under the principal place of residence and primary production exemption, will remain exempt, with the Amending Act actually expanding the principal place of residence exemption to allow it in circumstances where the land is held in a trust and is the principal place of residence of the nominated beneficiary or unitholders. To get the benefit of this exemption, the trustee must make a nomination of beneficiary or unitholders.
Procedurally, one of the major impositions of the Amending Act is the notification requirements set out in the Land Tax Act. All existing trusts that have not previously done so must give the Commissioner a notice that land is held on trust by 31 July 2020. In addition, as mentioned above, the trustee of a trust may be able to nominate a beneficiary or unitholders, thereby deeming that beneficiary or those unitholders to be an owner of the land in addition to the trustee. The timing of this nomination is different depending on the type of trust involved.
Going forward, notifications must be given to the Commissioner in various circumstances, including where:
In summary, the Amending Act effects a number of important changes to the way land tax is imposed and administered. Of particular note are:
Briony Hutchens
Director
p. +61 8 8124 1821
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This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.