Family unit trusts Land Tax threshold

DaveA · 26-09-2007, 02:52 PM

I sware i have read this before (although not sure here or smh) however crawaling through the Office State Revenue (NSW) i found this

Quote:

Family unit trusts

To assist families holding land valued up to $1 million in a family unit trust, the Government will revert to the previous tax treatment by applying the tax free threshold.

Unit trusts will qualify if they have previously been assessed as fixed trusts and at least 95 per cent of the units are owned by members of the same family.

Other unit trusts

In addition, the Government will allow all unit trusts which have previously been taxed as fixed trusts, 12 months grace to restructure their holdings into a fixed trust, allowing them to retain access to the land tax threshold without incurring State taxes on the restructuring transactions.

Furthermore, if a unit trust is restructured and becomes a fixed trust before 31 December 2007, it will be reassessed for the 2006 tax year to apply the benefit of the land tax threshold and an appropriate refund will be provided.

Source

Is this meaning that unit trusts now get land tax free thresholds, im guessing of $352,000 which individuals are allowed. I wonder if this represents an opportunity for people to utalise unit trusts a bit more...

Also i wonder if it works if the unit trusts units are held by a HDT. Technically units would still be owned by the same family.

Any opinions...

pthm · 27-09-2007, 08:07 AM

I did ask DGG this question. His reply was not good news - because the HDT is a discretionary trust in essence that is able to issue units. Hence, the land tax threshold for unit trusts in NSW does not apply to HDT - ie no threshold. We have an IP in regional NSW and even the land value is not that great but the land tax is killing the rent. We are thinking of selling the IP and stop buying IP via trust in NSW.

DaveA · 27-09-2007, 10:42 AM

this is now where it will be great to find out about the other thread, if you could by it in unit trust in your name while negatively geared and then transfer it a HDT when it becomes +ive geared you could be in a better position.

However CGT will become an issue, so once again it may be worth while to forgo the threshold to save paying the CGT

MattR · 27-09-2007, 12:02 PM

CALL TO ACTION

This change in Land Tax for Unit Trusts was and is a huge blow for investors in NSW and Vic. The Family Unit holders concession helps a few but still a large number are being stung quite highly. I have clients whose land tax bill has gone up by $5984 pa. That hurts!! This is an arbitary increase tax that has slipped under the radar!

All investors utilising Unit Trusts in NSW and Vic should be putting pressure on their respective state governments to get rid of this provsion.

I'd encourage all on these forums to do so and this can be done quite easily by putting pressure on the poor mugs who have to administer it, namely the Office(s) of State Revenue. Each time I speak with a clerk from Land Tax I give them an earful of why this is an unfair tax and why it is hurting investment. I state that I know that they don't make the laws and that I am not blaming them, but could they pass onto to their supervisor the effects this is having.

DaveA · 27-09-2007, 12:24 PM

Quote:

Originally Posted by MattR

CALL TO ACTION

This change in Land Tax for Unit Trusts was and is a huge blow for investors in NSW and Vic. The Family Unit holders concession helps a few but still a large number are being stung quite highly. I have clients whose land tax bill has gone up by $5984 pa. That hurts!! This is an arbitary increase tax that has slipped under the radar!

I dont understand how bring in a threshold leads to their tax bill going up? the % rate was decreased, so the only thing that could force their tax bill upwards is an increase in land prices...

Actually in saying this, is it possible (in nsw) to determine how much your land is worth with it being an investment. ie if its your ppor do you still get sent a certificate? also what about if your looking at buying a place, short of asking the vendor is there a way?

MattR · 27-09-2007, 04:31 PM

DaveA, prior to the Vic government winning their case in the High Court, unit trusts were entitled to the threshold for land tax.

Then NSW decided to (also) use the precedent and said that Unit Trusts were no longer entitled to the threshold. They had a moratorioum of one year then they enforced the new change. So some clients that previously got the threshold in their unit trusts were no longer entitled to get it and hence their land tax went up drastically.

There was one year (at the end of Bob Carr's rain (Edit: intentional spelling error)) when they did away with the threshold altogether and lowered the rate. It was such a farce that the very next year they went back to the old system with the threshold and the higher rate.

pthm · 28-09-2007, 07:44 AM

The land tax system in NSW is inconsistent with that in Victoria and Queensland - their main counterparts. In Vic and Qld, there is a threshold for both individuals and trusts (although the threshold for trusts is lower than for individuals - the important thing is that there is a threshold). NSW does not give a threshold to trusts. Even SA has a threshold for both individuals and trusts - it is the same.

I think one of the practical ways to lobby the NSW to change the current land tax system to give trusts a threshold is to write the Premier and members of Parliament where the IP is, to point out this inconsistency. There is no way to know if the land tax in NSW deters people who set up trusts to hold IPs to invest in other states. We are one of these people. We like to invest in NSW but we have stopped and invested in Vic and Qld instead.