The South Australian government has introduced new land tax changes which are set to take effect from midnight 30 June 2020. Given South Australia has the highest land tax rate in Australia the reforms are aimed at making the land tax system fairer and make South Australia a more competitive place to do business. The government claims that 90% of taxpayers – including “mum and dad” investors will be better off. The new provisions are complex and property owners should do their research and seek professional advice to ensure they don’t end up paying more tax than is necessary. Any changes must be made prior to the end of the financial year as land tax is calculated on holdings that exist as at 1 July in each financial year.
The measures will see the introduction of new rates and new methods of calculation. Key points:
- If your land is already exempt from land tax, the exemption will continue. For example, if it relates to primary production or the residence is your principal place of residence.
- If you only own one taxable property there are no changes to how your land tax is assessed. You may receive a reduction in land tax payable due to the tax-free threshold increasing to $450,000 and rate reductions – for example the top rate of land tax will drop from 3.7% to 2.4%. The same applies if you own multiple taxable properties (that are all owned by the same owner(s), as long as the combined taxable site value does not exceed the new threshold.
- A key change to the way land tax is calculated is that the property ownership on behalf of each person will now be aggregated. For example, if you own a share in multiple properties, your land tax will be calculated based on the total value of your personal holdings.
- Trusts will be subject to a 0.5% surcharge where the trust owns property with a site value exceeding $25,000. A default tax rate applies to trusts where an individual beneficiary is not declared. They will not be entitled to the new tax-free threshold of $450,000, however, the surcharge will not apply to charitable trusts or superannuation trusts. There are also special rules for the holders in fixed and unit trusts. Trustees will also be subject to extensive notification requirements.
- Special rules apply for land held by corporations. Corporations can be grouped and assessed as a single entity if they have the same controlling persons or where one company is able to cast 50% or more of the votes in the second company, or it owns half or more of the shares.
- Concessions by way of a $25 million transition relief fund are available for certain taxpayers
- Developers may also qualify for concessions in certain circumstances.
Scammell & Co. can assist individuals and businesses by providing legal advice relating to estate matters such as trust structures and tax obligations for beneficiaries, as well as assistance in company law and property law matters.
For further information on the new land tax reforms please refer to the RevenueSA website.