NSW Land Tax Threshold - Multiple Fixed Trusts?

[dabear]

Hi Guys,

This may be a noob trust question, but I haven't spotted it mentioned anywhere.

I know for eligible fixed unit trusts in NSW, the land tax free threshold applies. I'm wondering if I create multiple such fixed trusts, am I able to enjoy multiple free thresholds, one per trust? Assuming all these trusts have a PTY LTD trustee, and I'm the sole director of the company.

Many Thanks.

 

[Terry_w]

Hi Guys,

This may be a noob trust question, but I haven't spotted it mentioned anywhere.

I know for eligible fixed unit trusts in NSW, the land tax free threshold applies. I'm wondering if I create multiple such fixed trusts, am I able to enjoy multiple free thresholds, one per trust? Assuming all these trusts have a PTY LTD trustee, and I'm the sole director of the company.

Many Thanks.

No, a fixed trust doesn't really get a threshold in NSW. As the trust is fixed the owners of the units are considered owners of the trust property so their individual thresholds apply. Once the individual has used up this threshold, currently $412,000, inside or outside the trust then land tax would be payable.

 

[devank]

If husband & wife buy a property (together) then they get only one thresholds ($412,000) right?
Would they get double the threshold ($412,000 x 2) if they buy it through fixed trust (say 50:50 ownership)?

 

[Terry_w]

buying in a fixed trust is the same as in own names for land tax

-Clarrifcation = Depends on who owns the units - the unit holder is considered the owner of the proeprty for land tax purposes. If a discretionary trust owns the units then no threshold.

 

[D_One]

If husband & wife buy a property (together) then they get only one thresholds ($412,000) right?

That still confuses me, no mater how many times I've read OSR ruling and examples.

 

[Paul@PFI]

Well the above replies aren't quite true

NSW LT is applied to the owner of land - That is each trust is a seperate trust and DOES access a seperate threshold. This is best evident when a SMSF owns units in a property owning fixed trust. You can double dip sometimes...BUT...

Secondary taxation is where the pain can happen. The unit holders in a fixed trust are ALSO given a portion of the land from the primary trust (and a credit for the share of tax paid if the trust paid land tax). So the following outcomes are possible:
- If the unitholder laready has taxable land this share of trust land will add to their holdings. Pushing their taxes higher but they get credit for the tax already paid so there is no double taxation.
- If the unitholder is a non-fixed trust (eg a disc trust) then the previous threshold given to the fixed trust is then lost and that unitholder can be assessed on every dollar of land.
- If the UH is a SMSF it has its own threshold.

The outcome is that despite the second trust accessing a threshold, if the same unitholders have no entitlement to further threshold then they become taxed anyway.

Secondary taxation is often invisible. If the unitholder has a full threshold and the portion of their holding is less than threshold no assessment issues...Its unseen.

Looking through to the unitholders is very important. When a fixed trust registers for land tax it should provide OSR with a list of the unitholders and update this when changes occur. I deal with a lot of trusts and regularly see mistakes made with fixed trusts - the biggest problem is havinga disc trust own the units. That doesnt work. However if the individuals have already blown their thresholds it can be a VERY sound strategy.

A unit trust generally cant double dip thresholds. However where a SMSF is involved then a double dip can occur - Sometimes.

 

[Paul@PFI]

Hi Guys,

This may be a noob trust question, but I haven't spotted it mentioned anywhere.

I know for eligible fixed unit trusts in NSW, the land tax free threshold applies. I'm wondering if I create multiple such fixed trusts, am I able to enjoy multiple free thresholds, one per trust? Assuming all these trusts have a PTY LTD trustee, and I'm the sole director of the company.

Many Thanks.

In QLD you can do this BUT
1. Trusts have a reduced threshold v's others and
2. QLD has a indirect stamp duty rule. If you change unitholders in a trust holding QLD land then its dutiable as a land transfer for the portion of the land. ie change 10% units then its 10% dutiable.
3. If a QLD disc trust changes some parties or aspects of the trust duty can be triggered. eg Changing or adding an appointor !!

 

[dabear]

In QLD you can do this BUT
1. Trusts have a reduced threshold v's others and
2. QLD has a indirect stamp duty rule. If you change unitholders in a trust holding QLD land then its dutiable as a land transfer for the portion of the land. ie change 10% units then its 10% dutiable.
3. If a QLD disc trust changes some parties or aspects of the trust duty can be triggered. eg Changing or adding an appointor !!

Thank you for the reply, Terry & Paul.

I'm a single and over my LT threshold in NSW under my own name. That's why I'm exploring around to see if I can access additional threshold. Purely from LT perspective, since I have already blown my threshold, a discretionary trust sounds like a better alternative to fixed unit trust owning IPs in NSW.

That's very thoughtful to mention QLD. I'm about to look up there for my next IP. I suppose you can probably mitigate the CGT issue by having multiple appointers when the trust is set up?

Best Regards,

 

[Terry_w]

Thank you for the reply, Terry & Paul.

I'm a single and over my LT threshold in NSW under my own name. That's why I'm exploring around to see if I can access additional threshold. Purely from LT perspective, since I have already blown my threshold, a discretionary trust sounds like a better alternative to fixed unit trust owning IPs in NSW.

That's very thoughtful to mention QLD. I'm about to look up there for my next IP. I suppose you can probably mitigate the CGT issue by having multiple appointers when the trust is set up?

Best Regards,

in NSW a company would get its own land tax threshold - but then you have other issues to consider. A SMSF would too.

Appointors have no bearing on CGT.

 

[Paul@PFI]

Thank you for the reply, Terry & Paul.

I'm a single and over my LT threshold in NSW under my own name. That's why I'm exploring around to see if I can access additional threshold. Purely from LT perspective, since I have already blown my threshold, a discretionary trust sounds like a better alternative to fixed unit trust owning IPs in NSW.

That's very thoughtful to mention QLD. I'm about to look up there for my next IP. I suppose you can probably mitigate the CGT issue by having multiple appointers when the trust is set up?

Best Regards,

- Consider acquiring properties in other states
- Multiple appointors can be problematic. How do they address decisions ? Unanimous ? May be OK if they are spouse and both agree but what happens if they divorce ??
- I often see clients who have blown thresholds. Consider using a fixed trust with a DT as unitholder. Land tax outcomes same as personal ownership but with ability to change unitholders later.

 

[daedalus2014]

Well the above replies aren't quite true

NSW LT is applied to the owner of land - That is each trust is a seperate trust and DOES access a seperate threshold. This is best evident when a SMSF owns units in a property owning fixed trust. You can double dip sometimes...BUT...

Secondary taxation is where the pain can happen. The unit holders in a fixed trust are ALSO given a portion of the land from the primary trust (and a credit for the share of tax paid if the trust paid land tax). So the following outcomes are possible:
- If the unitholder laready has taxable land this share of trust land will add to their holdings. Pushing their taxes higher but they get credit for the tax already paid so there is no double taxation.
- If the unitholder is a non-fixed trust (eg a disc trust) then the previous threshold given to the fixed trust is then lost and that unitholder can be assessed on every dollar of land.
- If the UH is a SMSF it has its own threshold.

The outcome is that despite the second trust accessing a threshold, if the same unitholders have no entitlement to further threshold then they become taxed anyway.

Secondary taxation is often invisible. If the unitholder has a full threshold and the portion of their holding is less than threshold no assessment issues...Its unseen.

Looking through to the unitholders is very important. When a fixed trust registers for land tax it should provide OSR with a list of the unitholders and update this when changes occur. I deal with a lot of trusts and regularly see mistakes made with fixed trusts - the biggest problem is havinga disc trust own the units. That doesnt work. However if the individuals have already blown their thresholds it can be a VERY sound strategy.

A unit trust generally cant double dip thresholds. However where a SMSF is involved then a double dip can occur - Sometimes.

Hi Paul,

Is what you are saying that SMSFs have their own tax free threshold? So even if the trustees have exceed their land tax free threshold due to personal land holdings, land holdings inside the SMSF under $412k (2014 threshold) will not be subject to land tax?

further to this as per the OP's question, if one creates multiple SMSF then we can effectively obtain additional land tax free threshold?


The Office of State Revenue seems to indicate this:

"The following trusts receive the land tax threshold:
A superannuation trust is a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust under Sections 42, 43 and 44 respectively of the Superannuation Industry (Supervision) Act 1993 of the Commonwealth."
http://www.osr.nsw.gov.au/taxes/land/about

I also found a blog post that seems to indicate one can have multiple NSW land tax free thresholds by setting up multiple SMSF funds
http://spionline.com.au/blog/latest-blogs/11729-land-tax-a-thing-of-the-past-for-savvy-investors


Apologies if I misunderstood, but your post seems to contradict this. Is this because your post regarding secondary taxation relates to the SMSF being unit holders in a fixed trust rather than owning direct land via its trustees?