All Topics / Legal & Accounting / Land tax & trusts

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  • Profile photo of Waz83Waz83
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    @waz83
    Join Date: 2012
    Post Count: 9

    Hi there, I am weighing up the pros & cons of buying an IP in a trust or in our personal names in NSw

    My question for today is, if I buy in a trust, does the threshold for the land tax still apply?

    Thanks

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544

    Varies from state to state. Suggest you check out the relevant state government websites.

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    Most trusts in NSW start paying land tax with no threshold. Check the osr.nsw.gov.au website

    Profile photo of Jeff123Jeff123
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    @jeff123
    Join Date: 2012
    Post Count: 31

    Hi, Agree with Derek.  Recommend you get some serious advice on trusts and structures.  It is often a little more complex than you think!  See if you can ask around and use a solicitor that specialises in this type of thing.  I recently read a post on this (think it may have been in this forum) do a little digging and best of luck.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    in NSW most trusts don't get any land tax free threshold.

    "Exceptions" for fixed trusts, SMSFs and deceased estates.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Waz83Waz83
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    @waz83
    Join Date: 2012
    Post Count: 9

    Thanks guys, thats what i interpreted from the site  but i just wants an experienced opinion. I think I'll buy in our personal names until we reach the threshold and then buy in a trust from then on in..

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
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    HI Waz,

    Don't know your personal situation. Nor do I know the land tax rates in NSW but ……………………………..

    I don't think you should be making your decision solely based on possible land tax bills.

    Trusts are primarily designed as a means of protecting assets. This should be your primary consideration and not teh size of the bill.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    In NSW if you had used a fixed trust to own land then:

    1. Ability to transfer units to a SMSF at a later date

    2. Access to the refinancing principal

    3. slightly greater asset protection.

    4. ability to access the land tax free threshold, and

    5. stamp duty savings on the transfer of untis – due to be abolished July 1 too.

    None of these are available if you buy in your own name.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    Asset protection should not necessarily be your sole determinant. Other factors such as estate planning, distribution of income, no. of properties that you intend to own, the risk of getting sued should all be considered.

    Profile photo of PropertyGutsPropertyGuts
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    @propertyguts
    Join Date: 2010
    Post Count: 57

    Land tax and trusts.   Are other states (Qld, TAS, Vic, WA, SA) the same as NSW?    

    With respect to TerryW's comments

    ""in NSW most trusts don't get any land tax free threshold.

    Exceptions for fixed trusts, SMSFs and deceased estates"".

    Please some comments from trustee's with property in quennie, tassie etc

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213
    PropertyGuts wrote:
    Land tax and trusts.   Are other states (Qld, TAS, Vic, WA, SA) the same as NSW?    

    With respect to TerryW's comments

    ""in NSW most trusts don't get any land tax free threshold.

    Exceptions for fixed trusts, SMSFs and deceased estates"".

    Please some comments from trustee's with property in quennie, tassie etc

    Off the top of my head, there is a land tax threshold in QLD for trusts. Once you hit the threshold start a new trust and get a new threshold.
    Vic is similar to NSW, if fixed unit trust then individuals get the threshold. There is no threshold, or very small for non fixed trusts. In Tassie I am not sure but one of my trusts was paying land tax – the amount was too small to force me to look at the relevant act to find out the rules.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    In Qld the threshold is 350K + for a Trust, Company or absentee owner.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of Anthony KAnthony K
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    @anthony-k
    Join Date: 2010
    Post Count: 56

    Hi Waz and All

    Re: Unit Trusts and Land Tax

    If you have the correct documents you can gain the land tax Threshold in NSW and in other states as they all have similar rules.

    It is based on facts not opinions as the recent case below illustrates. Remember also that land tax paid under state law is a deuctible expense unedr federal law so it gets discounted.  

    In a recent decision (Chief Commissioner of State Revenue v. Sayden Pty Ltd ATF Griffin Property Unit Trust (RD) [2012] NSWADTAP 14) the Appeal Panel of the NSW Administrative Decisions Tribunal held that a clause inserted into a unit trust deed seeking to make the trust a fixed trust for land tax purposes (a "fixed trust clause") by mirroring the relevant section (section 3A(3B)) in the Land Tax Management Act 1956 (NSW) was ineffective. This was because there were a number of other clauses in the trust deed that were not amended and were held to be inconsistent with the trust being a fixed trust. This is despite the fact that the relevant fixed trust clause purported to override everything else in the trust deed.

    Another benefit of buying this way is that you allow your SMSF to acquire units in the trust later you can use SMSF money to use the trust for other properties.

    You cannot do this if it is in your personal names.

    You can also use SMSF or UT borrowing to buy units if it is set up correctly – we have been doing this for clients for over 20 years without problems.

    It all depends on the set up – remember the ATO has a current ruling ID 2002/388 that allows you to live in a property owned by a unit trust – SMSF structure provided you pay market rental. We have correspondence from the ATO in 2003 and 2008 which confirms their ruling.

    Planning and structure can determine whether you reach your goals.

    Regards to ALL

    Anthony

     

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