Trusts
16. Land Tax & Transfer Duties
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 23 Sep 2015
- Land tax is calculated on property value according to a tiered system. This means there may be different rates and thresholds for individuals, companies and trusts.
- Land tax rules also vary from state to state so it is important to obtain independent advice relevant to your own state or territory when considering the purchase or transfer of land under a trust. Often the tax advantages will depend on the number, location and value of properties which are owned by the family group.
- In many cases trusts will not receive the benefit of the land tax threshold. Discretionary trusts and family unit trusts may have to pay land tax at a flat rate on the total value of the land owned by the trust unless an exemption exists. The benefit of structuring your trust to take advantage of such thresholds is that land tax is only payable on each dollar of value above the relevant state threshold rather than the total amount.
- An example is the Principal Place of Residence (PPOR) exemption. The PPOR exemption for land held in a trust may apply if the residence is being used be a person with a disability.
- In NSW and Victoria discretionary trusts (classified as 'special trusts') do not receive the benefit of either the PPOR exemption or the land tax threshold. However a fixed unit trust where the beneficiaries are considered to have a proprietary interest in the land may still be eligible for the land tax thresholds. This depends on the wording of the trust deed and administration of the trust as well as the relevant state.
- Legal advice should be sought on the classification of your unit trust. Some unit trusts will still be considered 'special' trusts and treated in the same way as discretionary trusts.
- Many states also have a limit on the total value of land that a trust can hold before being liable to pay a surcharge on top of the usual land tax amount. For this reason groups of trusts can be an effective way of holding properties. If the properties are held in multiple family trusts it may be possible to reduce the amount of land tax payable on those properties each year. Depending on the relevant state or territory each trust could take advantage of the tax-free threshold while also avoiding the surcharge rate.
- Depending on which state or territory you live in there may also be exemptions on transfer duties for discretionary trusts. For example in Queensland there are exemptions from paying transfer duty on transfers of property from a trustee to a beneficiary if that beneficiary is under a legal disability.
View more Information on Business & Company