Beware Land Tax Aggregation Rules – Trust me!
On 25 February 2016, the Commissioner of State Taxation released his view on the interpretation around land “held by the same taxpayer on trust for the same beneficiaries” in relation to land tax aggregation.
What does aggregation mean?
In South Australia, if land is held by the same taxpayer, the value of that land is aggregated for the calculation of land tax. For example, presume you purchase two properties:
- Property 1 = land valued at $350,000
- Property 2 = land valued at $450,000
If the two properties are not aggregated and land tax is calculated on each individual property, the land tax would amount to $840. Because land tax is calculated on a sliding scale, if the values were to be aggregated, the land tax would amount to $4,765.50 (just over 6 times the non-aggregated figure).
What do I need to know?
The Ruling essentially states that if land is held on separate trusts that has the same beneficiaries and trustees, the values of the land held by those trusts will be aggregated for land tax purposes.
The Ruling goes on to clarify:
- disaggregation can be granted if the Commissioner is satisfied that the trusts have different beneficiaries;
- the Commissioner will consider a broad range of beneficiaries;
- it is insufficient that the primary/specified beneficiaries of the trusts are different if the broad category of eligible beneficiaries will result in no difference in the beneficiaries as a whole;
- if there is a differentiation between a beneficiary’s entitlement to the income and capital of the trust, the Commissioner will consider the differences between the rights to capital (because land is a capital asset);
- distribution history of the trust is irrelevant;
- it is important to highlight the differences in capital beneficiaries and their rights if applying for disaggregation.
For a full copy of the Ruling click here.
We understand this can be a tricky issue. If you are concerned about aggregation or require further information on how to apply to RevenueSA for disaggregation please contact Andrea Michaels at email@example.com or on 7111 2999.