Despite many believing the new land tax regulations would not come into effect, they in fact have. So, what does this mean for you? Michel Zerella, Director of MasterTax, explains how this could affect you and the land tax you must pay.
So, how did land tax work in the past?
Previously, individual properties with a combined land value over the tax threshold were assessed in their own right. Landowners could own numerous properties under multiple names being their individual name, trust names or other entity names. As their values were assessed individually, they attracted the lowest land tax rate.
Changes to the land tax arrangements in brief
- Increase in the tax-free threshold to $450,000 (previously $391,000)
- Reduction in the top land tax rate from 3.7% to 2.4%
- The top threshold set at $1.35M
- Landholders’ interests will be aggregated across joint and individual ownerships
- Trusts will be subject to a 0.5% surcharge where they own property with value exceeding $25,000. They will not be entitled to the new tax-free threshold of $450,000.
- Transitional measure is in place for discretionary trusts that owned land on 16 October 2019 where the trust nominated an individual as a “designated beneficiary”. It will not be subject to the higher trust rates of land tax.
- A trustee who acquires or disposes of SA land must notify the commissioner within 1 month of the acquisition or disposal.
- Transitional relief will be available via the land tax transitional fund for taxpayers who have an increase in their land tax assessments as a result of the changes in aggregation of land owned as at 16 October 2019.
What do the new changes mean?
With the new changes in effect, if you own multiple properties, all investment properties will be aggregated for the purpose of determining the overall land value. If the land value of all investment properties exceeds $450,000 there will be a liability for land tax.This will also apply to any land held in a trust that exceeds the tax free threshold of $25,000 unless you have a nominated beneficiary prior to the passing of the new land tax measures.
Unfortunately, you will not escape being assessed if you hold property jointly or in a company name. This means the overall land value will be significantly higher therefore the amount of land tax will increase accordingly.
The good news is people who only own property in their individual name will not be heavily impacted by the new changes, in fact in a lot of cases the land tax liability will decrease.
When will these changes take effect?
These changes have been announced to apply from the 2020 – 2021 financial year. Please email or call us on (08) 8172 9150 to organise an appointment so we can help you prepare for the changes that will affect your personal circumstances.
