You may have recently received a letter from RevenueSA asking you to take action in relation to your trust by 3 June 2020.  This is because the SA Government has recently made changes to its land tax law.

One significant change is that land owned by most trusts, from 1 July 2020, will be subject to increased land tax rates, compared to rates than an individual landowner would pay.

To give you an idea, land worth $600,000 will be subject to the following land tax in 2020-21 (estimated using RevenueSA calculators, see here):

  • For an individual owner: $750
  • For a trustee: $3,750

This $3,000 difference is significant, and will increase if the land has a higher value, or other land is also owned.

These changes are particularly concerning for many family groups, because it is common to hold land in discretionary trusts for asset protection and income tax purposes.

Avoid paying ‘surcharge’ trust land tax

However, all is not lost, because RevenueSA has allowed some discretionary trusts to avoid these increased ‘trust rates’ provided they nominate a designated beneficiary who will be deemed to be the underlying owner of the trust’s land for the purpose of assessing land tax under ‘normal’ rates (including for aggregation purposes if that designated beneficiary owns any other land).

Who can be a ‘designated beneficiary’?

A designated beneficiary must meet these requirements:

  • They are a natural person;
  • They are over 18 years old;
  • They are a beneficiary of the trust on 16 October 2019 (being when the new law was introduced in the House of Assembly); and
  • They have verified by statutory declaration that they consent to being the designated beneficiary of the trust.

What you need to do

It is important that every discretionary trust that owns land in SA do the following things:

  • If RevenueSA has not been previously notified, complete and submit a Notification Form to RevenueSA (see here), with all required associated documentation, to tell RevenueSA the land is owned by a trust. This must be done before 31 July 2020; and
  • Choose an appropriate designated beneficiary and have them sign a statutory declaration that complies with the law, and notify RevenueSA as soon as possible, but before 30 June 2021. RevenueSA has said it will not accept any nomination forms made after this.

It is important to remember you choose a designated beneficiary carefully, because the choice cannot generally be revoked, and it will mean that person will be subject to aggregation of the trust land with any land they own or want to buy in future.

If you want advice about who you should choose to be a designated beneficiary for your trust, and preparing a compliant statutory declaration, feel free to contact us on 1300 654 590.