SA Land Tax changes for family trusts

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:

  • 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 2020. 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.

Our Great Lawyer Guarantee

We want to be part of your team over the long term. We'll achieve this by sticking closely to the following principles:

  • We'll listen carefully to understand what you want to achieve. Then we'll thoroughly explain our advice and step you through the documents. You can be sure you'll know the full consequences.
  • Our lawyers work as a team, so someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
  • One of our key goals is to pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
  • We only do what we're good at. You can be confident that we know what we're doing and won't pass on the cost of our learning.
  • For advice and documents, we provide a fixed or capped quote so you don’t take price risk. If you're in a dispute, we'll map out the process and costs so you know what to expect.
  • We're not in this game for our egos. We're in it for a front row seat to witness your success.

We measure our success on how efficiently we have facilitated your objectives, enhanced your relationships, and reduced the level of stress for all involved.

If we sound like people you can work with, call us now on 1300 654 590 and speak directly with a great lawyer.

Call 1300 654 590 and speak with a lawyer today

You'll be put straight through to a great lawyer who will guide you to the right solution.

Estate planning for sole directors of private companies

Estate planning for sole directors of private companies

If you are the sole shareholder and director of a private company, have you thought about what will happen to your business if you lose capacity or die? Failure to plan for this eventuality can affect the financial viability of your assets and leave your family vulnerable – so it is something you need to turn your mind to. Fortunately, there are several solutions that are easy to implement and lots of advice about these issues is available.

read more