Land tax is a vital consideration whenever you purchase a property. This is because in South Australia, properties with the same ownership are added together and taxed at potentially substantially higher rates than if the properties were owned by different owners. For example if a husband and wife owned two properties jointly (excluding their principal place of residence) with a land value of $400,000 each, the amount of land tax payable would be $4,765. If however one of these properties was owned by the husband and the other by the wife individually, the land tax payable would be $670.
Revenue SA have recently changed their interpretation in LT004 on what constitutes a different owner in regards to trusts. The ruling states that where two trusts have the same trustee/s and the same beneficial ownership, the two trusts will be combined for calculating Land Tax. This would likely result in a significantly higher land tax bill. This means that if you are involved in two trusts (including self-managed super funds) which have the same trustee and the same people entitled to the distributions from that trust, you need to consider whether it is worthwhile making a change to minimise your potential land tax bill. There are other factors that need to be taken into account including capital gains tax, stamp duty, income tax, asset protection and conveyancing costs so care needs to be taken and advice should be sought before taking any actions.
If you are looking at purchasing a new property or if you think you may be paying too much land tax on your existing properties please contact us. There are some simple steps you may be able to take to reduce your land tax bill.
You can view the full Ruling here: https://www.revenuesa.sa.gov.au/rulings/LT004.pdf