Beware! SRO (Victoria) are on a warpath! Just got a land tax bill of 12k!

[DavidMc]

A few weeks ago I received a questionnaire from the SRO. They said it was sent as a result of some data matching they had done with the ATO.

Now, I have always been open, honest and accurate with all my tax dealings and have been paying a around $2k worth of land tax each year so I had nothing to worry. I spoke with my Accountant about it, filled it out and sent it back.

Then, just last week, I opened a letter from the SRO and almost had a heart attack! I have just received 'adjusted' land tax bills going back 5 years showing that I owe around $12,000!

It says I am being penalised an additional 10% because I failed to notify the Commissioner of State Revenue that my last property purchase (where I live now) was purchased in a trust.

This is really strange to me as I've never notified the SRO of any of the other purchases I've made yet they know all of them.... not to mention I did pay them a whopping $25k of Stamp Duty (the countries highest rate, mind you!) when I bought the property - you think they'd also record the buyers name at the time then!

1. Who normally does this? It is your conveyancer / lawyer, accountant or nobody?

Has anyone else received letters like this? Another client of my accountant has just received a 30k bill! (no idea what their situation is though).

2. Also, they are telling my I cannot claim the PPR exemption for my PPOR in my Trust 'because we can see you are claiming rent on it'. Is this true? I do live in the property.

 

[Paul@PFI]

A few weeks ago I received a questionnaire from the SRO. They said it was sent as a result of some data matching they had done with the ATO.

Now, I have always been open, honest and accurate with all my tax dealings and have been paying a around $2k worth of land tax each year so I had nothing to worry. I spoke with my Accountant about it, filled it out and sent it back.

Then, just last week, I opened a letter from the SRO and almost had a heart attack! I have just received 'adjusted' land tax bills going back 5 years showing that I owe around $12,000!

It says I am being penalised an additional 10% because I failed to notify the Commissioner of State Revenue that my last property purchase (where I live now) was purchased in a trust.

This is really strange to me as I've never notified the SRO of any of the other purchases I've made yet they know all of them.... not to mention I did pay them a whopping $25k of Stamp Duty (the countries highest rate, mind you!) when I bought the property - you think they'd also record the buyers name at the time then!

1. Who normally does this? It is your conveyancer / lawyer, accountant or nobody?

Has anyone else received letters like this? Another client of my accountant has just received a 30k bill! (no idea what their situation is though).

2. Also, they are telling my I cannot claim the PPR exemption for my PPOR in my Trust 'because we can see you are claiming rent on it'. Is this true? I do live in the property.

1. The land owner has an obligation to register for and pay land tax. I'm a property savvy accountant and I recommend all clients register at time of purchase regardless of the threshold or value. In Vic a trust has a threshold - Lower than individuals. Count yourself lucky. In NSW most trusts have a zero threshold. Land tax is a first charge when sold and a land tax clearance certificate is required to confirm that there is no unpaid liability. They regularly audit and cross match data with tenency records, rates issues such as different addresses etc.
- Is your property insured ?
- Do any rented props have LL insurance ?
- Is the water connected
- Is the electricity connected
- Do you pay rates
All are owner responsibilities.

2. If you reside in the property they will seek proof. You haven't followed the rules for occupying a trust owned residence !!! (You must apply) It depends on how long you have resided there but they wont backdate it.

Remember that the states collect GST revenue and so its in Govt interest to allow the ATO to share data so states can collect their taxes.

Your accountant sounds like a pelican. And he checked what was reported. That should have sounded the alarm bells. You might want to tell him that the arrears is deductible. The penalty not.

 

[Terry_w]

A few weeks ago I received a questionnaire from the SRO. They said it was sent as a result of some data matching they had done with the ATO.

Now, I have always been open, honest and accurate with all my tax dealings and have been paying a around $2k worth of land tax each year so I had nothing to worry. I spoke with my Accountant about it, filled it out and sent it back.

Then, just last week, I opened a letter from the SRO and almost had a heart attack! I have just received 'adjusted' land tax bills going back 5 years showing that I owe around $12,000!

It says I am being penalised an additional 10% because I failed to notify the Commissioner of State Revenue that my last property purchase (where I live now) was purchased in a trust.

This is really strange to me as I've never notified the SRO of any of the other purchases I've made yet they know all of them.... not to mention I did pay them a whopping $25k of Stamp Duty (the countries highest rate, mind you!) when I bought the property - you think they'd also record the buyers name at the time then!

1. Who normally does this? It is your conveyancer / lawyer, accountant or nobody?

Has anyone else received letters like this? Another client of my accountant has just received a 30k bill! (no idea what their situation is though).

2. Also, they are telling my I cannot claim the PPR exemption for my PPOR in my Trust 'because we can see you are claiming rent on it'. Is this true? I do live in the property.

1. The trustee must register with the OSR. OSR would not know the trustee is owner as trustee or in their own right so trusts must register - s46K Land tax act vic

2. Not sure they aer right on their reasons here. Is it a pre 2006 trust? and are you the nominated beneficiary?

 

[BLTN]

Wait, I may have misread something, but were you not paying any land tax at all on the property in a trust?

If that's the case, surely you should have known that you had a liability to pay there?

 

[DavidMc]

Thank you Paul.

1. The land owner has an obligation to register for and pay land tax.

I agree, the bucks stops with me. However, if I engage a conveyencer or lawyer to 'do all tasks relating to the transfer of property' shouldn't that also include nominating the SRO I bought it? (along with the payment of the stamp duty)? I think it's a pretty reasonable expectation.

Also, I have never previously registered any land for land tax yet they appear in the calculations?

2. If you reside in the property they will seek proof. You haven't followed the rules for occupying a trust owned residence !!! (You must apply) It depends on how long you have resided there but they wont backdate it.

I can easily provide proof, I have gas/water/phone/internet bills, bank statements, car rego, etc. Based on your comments I assume there is an application form on the SRO website. I will take a look. They have backdated to 2010, I'd like to backdate this far too.

 

[DavidMc]

2. Not sure they aer right on their reasons here. Is it a pre 2006 trust? and are you the nominated beneficiary?

Yes it's a pre-2006 trust. It's a MGS HDT from Chris Batten / Dale GG (http://prc.macquariegs.com.au/). I am the nominated beneficiary. I am claiming the interest and rent as outlined in Dale's book Trust Magic.

Thank you Terry!

 

[oc1]

Notice of acquisition I believe.

 

[Paul@PFI]

Thank you Paul.



I agree, the bucks stops with me. However, if I engage a conveyencer or lawyer to 'do all tasks relating to the transfer of property' shouldn't that also include nominating the SRO I bought it? (along with the payment of the stamp duty)? I think it's a pretty reasonable expectation.

Also, I have never previously registered any land for land tax yet they appear in the calculations?




I can easily provide proof, I have gas/water/phone/internet bills, bank statements, car rego, etc. Based on your comments I assume there is an application form on the SRO website. I will take a look. They have backdated to 2010, I'd like to backdate this far too.

This is the form you didn't complete.

Specifically read : To nominate a PPR beneficiary of a discretionary or unit trust who is using the land as their PPR, the trustee needs to lodge the Trusts - Nomination of PPR/subsequent PPR beneficiary form to the SRO. This nomination can be made at any time. Nominations will be effective for the land tax year in which the nomination is lodged (providing the nominated PPR beneficiary has used and occupied the land as their PPR for the relevant PPR period).

You cant backdate. They can. Once lodged the form acts until its changed or you withdraw it. I would argue you should at least try. Depends ofn type of trust. I suggest you need to find a Vic based duties lawyer to assist before Numpty the Accountant makes it worse.

So you didn't register, didn't apply for an exemption and now cant ?

 

[Paul@PFI]

David - Good news. I read the OSR form and it is valid for UP TO 3 MONTHS from the date of the assessment.

Off you go - Get some advice and get this moving so you can get the concession for at least part of the tax.

 

[rooky]

what about WA

Hi Paul,

What about IP owned in personal name in WA and also PPOR ? Do we need to inform OSR about our purchase ?

 

[jrc]

Yes it's a pre-2006 trust. It's a MGS HDT from Chris Batten / Dale GG (http://prc.macquariegs.com.au/). I am the nominated beneficiary. I am claiming the interest and rent as outlined in Dale's book Trust Magic.

Thank you Terry!

Danger will Robinson! You intend to tell the Victorians that this is your PPOR whilst telling the ATO that your trust is claiming the interest on the loan ( and presumably other deductions such as rates, maintenance etc) and declaring the rent.

Worst case scenario might be the Victorians disallow your claim and theATO applies Part IVA with penalties.

I would get an opinion from someone who is more au fait than your accountant seems to be.

 

[Terry_w]

I agree, the bucks stops with me. However, if I engage a conveyencer or lawyer to 'do all tasks relating to the transfer of property' shouldn't that also include nominating the SRO I bought it? (along with the payment of the stamp duty)? I think it's a pretty reasonable expectation.
.

What did you contract with the conveyancer/lawyer to do? Transfer title probably. The trustee is responsible. The lawyer wouldn't review the trust deed to see if you are a nominated beneficiary unless you requested this - a covneyancer couldn't do this work.

Its like getting insurance. The owner arranges it.

 

[Terry_w]

[

You cant backdate. They can.

SRO doesn't have the power to backdate a main residence nomination. Under S. 46F(5)(a)(ii) a nomination takes effect from the tax year it is lodged.

 

[Terry_w]

Yes it's a pre-2006 trust. It's a MGS HDT from Chris Batten / Dale GG (http://prc.macquariegs.com.au/). I am the nominated beneficiary. I am claiming the interest and rent as outlined in Dale's book Trust Magic.

Thank you Terry!

You are lucky in that it should qualify as a discretioanry trust for the purposes of the land tax act.

You are probably not the nominated beneficiary for land this purposes. This is a separate nomination the trustee must make with you accepting in writing.
s46F(3)(a)(iii)

(3) The person nominated must be?

(a) a natural person who?

(i) is a beneficiary of the trust; and

(ii) is of or over the age of 18 years on 31 December 2005; and

(iii) signifies in writing his or her acceptance of the nomination;

 

[Paul@PFI]

Danger will Robinson! You intend to tell the Victorians that this is your PPOR whilst telling the ATO that your trust is claiming the interest on the loan ( and presumably other deductions such as rates, maintenance etc) and declaring the rent.

Worst case scenario might be the Victorians disallow your claim and theATO applies Part IVA with penalties.

I would get an opinion from someone who is more au fait than your accountant seems to be.

A Jandmoor style Trust ??? The ATO have issued warnings about following that decision. Especially if its Hybrid. Just remember everything you tell OSR will be known by ATO.

 

[Paul@PFI]

Hi Paul,

What about IP owned in personal name in WA and also PPOR ? Do we need to inform OSR about our purchase ?

All buyers in all states should register for land tax and ignore thresholds. They change as does value.