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South Australian Land Tax changes are coming. Are you prepared?

South Australian Land Tax changes are coming. Are you prepared?

Ross Sicuro

Changes to the Land Tax Act 1936 (South Australia) come into effect on 30 June 2020. Amendments to the Act have been focused around changes to aggregation and additional tax on land held in trusts.
 
In anticipation for this, landholders are likely to have received correspondence (click here to view example) from Revenue SA requesting the landholder confirm relevant details via the RevenueSA Online portal. Details that will need to be provided include the confirmation of the land held and details of ownership. The process will require access to a series of documents to support responses and provide evidence.
 
In addition, where the land is held by a company (in its own right and not as trustee of a trust), confirmation and details of any related companies is also requested to enable correct aggregation of land held by related companies. We note however, there are particular concessions that can be applied for with regards to certain residential property developers and land developed for affordable housing.  
 
The correspondence also includes the ‘2020-21 Land Tax Information For Trusts’. This specifically applies where land is held by a trustee for a trust. This has been a common style and approach to holding property investments. The information aims to set out the requirements for reporting that the land is held on trust, and importantly the options relating to nominating a designated beneficiary of a trust to prevent the higher trust rates of land tax being charged. The option to nominate a designated beneficiary of a trust is only available where the trust owned the land prior to 16 October 2019.
 
The decision on whether to nominate a designated beneficiary of a trust will depend on a number of factors, including (but not limited to);
  • whether the beneficiary holds other land in their individual name*
  • the nature/use of the land held in trust
  • the valuation of the land
* it is critical that all land is identified and considered here including land not rented/deriving income including but not limited to holiday homes and shacks.
 
It is important to acknowledge key dates and timeframes for the provision of information relating to Trusts:
  1. A trustee who owns land on trust as at 30 June 2020, must notify Revenue SA of that trust by 31 July 2020. Also any new land purchased on trust or changes to an existing trust must be notified within one month of the purchase or change.
     
  2. A trustee can nominate the designated beneficiary of a discretionary trust no later than 30 June 2021. After this date a trustee will not be able to nominate a designated beneficiary (however, in limited circumstances a designated beneficiary may be substituted). If a nomination is made during the 2020-21 financial year, a trustee can elect if the nomination will take effect from 2020-21 or 2021-22.
Similar considerations will also need to be made for Unit Trusts. This can be particularly complex where Unitholders are not part of the same family group.
 
Unfortunately due to the complexity of the changes, there is no ‘one size fits all’ solution.
 
It is important your situation is adequately assessed and reviewed to ensure the best possible outcome is achieved. We encourage you to contact your Moore Australia advisor to assist and guide you through this process.  
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