Can you potentially save up to $6592 in Land Tax each year?23-Apr-2014
If you have an existing trust with property, you may now be liable for land tax for the full unimproved land value and will not receive any tax free threshold.
This could cost up to $6592 a year in land tax due to NSW Office of State Revenue (OSR) amendments to their rulings on trusts with properties.
By converting a unit trust to a Land Tax Unit Trust the Trustee will receive the current land tax threshold of $412,000 which is a potential saving of $6592 per year.
The benefits of using a unit trust, especially to hold property, are well documented. A unit trust allows for the following benefits:
1. Issue and redemption of units without stamp duty,2. Selling units to a SMSF without breaching section 66 of the SIS Act,3. Borrowing to pay down non-deductible debt,4. Cloning without any CGT consequence,5. Land tax savings if the deed satisfies the criteria of a fixed trust for the purposes of the Land Tax Management Act 1956.
By converting a discretionary trust or hybrid discretionary trust to a Land Tax Unit Trust the following benefits are available:
1. Issue and redemption of units without stamp duty,2. Selling units to a SMSF without breaching section 66 of the SIS Act,3. Land tax saving of up to $6592 per annum.
If you have a trust which owns property in NSW, don’t wait for the OSR to investigate and potentially assess as a special trust as the penalties and back taxes from the previous four years could be over $50,000.
Call the team at Simeoni to arrange a consultation to ensure you don’t pay any unnecessary land tax.