All Topics / Help Needed! / Tax Implications from a Trust

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  • Profile photo of Thush80Thush80
    Participant
    @thush80
    Join Date: 2021
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    I requested to set up the trust from my accountant  and she mentioned about significant  LAND Tax implications  when purchasing property from trust. Can any one let me know about what they can be ?

    any one who already set up a trust would be able to help me ?

    • This topic was modified 1 week, 3 days ago by Profile photo of Thush80 Thush80.
    Profile photo of nm95nm95
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    @nm95
    Join Date: 2021
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    For NSW, the land tax threshold is available to individual property investors, joint owners or tenants in common, companies, fixed unit trusts and self-managed superannuation funds. What this means is that these entities do not pay any land tax until the taxable value of the land they hold exceeds the land tax threshold which is currently $755,000 for NSW. However, a discretionary trust and some unit trusts (i.e. non fixed units trusts) do not receive this threshold and are taxed at a flat rate of 1.6% of the taxable value of the properties.

    By way of example, if the taxable value of the interest in a property is $500,000, then a discretionary trust will incur an annual land tax liability of $8,000.

     

    Profile photo of BennyBenny
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    @benny
    Join Date: 2002
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    Further to NM95’s comment, do consider that different states may well have different laws.

    e.g. for Qld, a trust has a $350k allowance before Land Tax is charged, while (according to nm95 above) NSW seems to have no allowance.

    Why not ask that same accountant to spell out for you exactly what applies in your state for your Trust (if you went ahead with it).  As you can see, Land Tax can be a significant part of your total costs.

    Using nm95’s example of $8000pa, how much is that per week?  Scarey huh?  Would the tenants stump up the extra do you think?  ;)

    Benny

    PS  Steve has made the comment before of “new investors setting up expensive Trusts to protect very little”…. and that is worth some thought.  If you are starting out and are not sure whether or not property investing is to be your calling, there are other ways to protect yourself that aren’t as costly.

    Of course if you ARE planning on making this a significant business venture, then using Trusts is a very sensible approach imho.

    Profile photo of Thush80Thush80
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    @thush80
    Join Date: 2021
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    thank you all

    • This reply was modified 1 week, 2 days ago by Profile photo of Thush80 Thush80.
    Profile photo of BennyBenny
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    @benny
    Join Date: 2002
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    Sure thing – google the Office of State Revenue in Qld and all should be revealed.   Your accountant should still be a good path too though, in case you don’t read far enough !!  ;)

    Profile photo of Thush80Thush80
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    @thush80
    Join Date: 2021
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    thanks a lot Benny .

    Profile photo of nm95nm95
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    @nm95
    Join Date: 2021
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    Hi Benny,

    I just want to confirm the below.

    WA has land tax apply after land value exceed $300,000 for individual.

    Does that value apply to trust as well?

    Thank you.

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

    beware as accountants cannot advise on land tax as it is state law and doing so would be providing legal advice for which they would not be covered by insurance. This is the case also when they set up trusts.

     

    In WA a trustee of a discretionary trust could get a separate land tax threshold to land they hold beneficially (not as trustee).

    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/

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