What are the land tax changes?
New land tax legislation will commence from 1 July 2020 which will result in the following changes:
- Land tax rates, including a reduction in the top tax rate from 3.7% to 2.4%
- Non-taxable land thresholds increased from $391,000 to $450,000
- Introduction of a new threshold and penalty rate for property held on trust. Trusts do have the ability to nominate a beneficiary to avoid the penalty rate
- Introduction of related company aggregation. This will result in many more land holdings being aggregated for land tax purposes
- Expansion of individual and joint ownership asset aggregation
- The most crucial change, is the requirement for RevenueSA to know the ultimate owner of the land. Due to this change, properties which were previously stand alone for land tax purposes, may now be grouped, resulting in an increase of land tax imposed every year, possibly by a very substantial amount. These changes will affect land currently owned and the strategy for purchasing land in the future
What is the impact of these changes?
- For some land owners this will result in a reduction of land tax payable
- However, for others without careful planning and analysis there is the potential for a greater land tax levy being imposed
- There is an obligation on any individual or entity to advise if land is held on behalf of a trust
- A choice to nominate or not, will impact the levy rate on the land. It may be beneficial to not nominate a beneficiary, or not advise the unit holders of a unit trust and therefore this needs careful consideration
- Previous ownership strategies may no longer be effective and should be reviewed
CAUTION: The RevenueSA notification process (per below) appears straight forward, however we strongly recommend you contact us before completing their online process.
What is the RevenueSA notification process you must attend to?
RevenueSA has commenced mailing out letters to land owners, instructing them to log in and complete required steps by 3 June 2020. Per RevenueSA’s letter, land owners need to:
- Confirm all land has been included in your ownership;
- Add any land not included;
- Advise if land has been included incorrectly; and
- Advise of any land held as trustee of a trust which may include advising of a beneficiary or unit holders of a unit trust.
This is a very important process and it is crucial that the correct owner of the land is advised so they are issued with the correct land tax assessment.
The information provided to RevenueSA will be unique to each land holder and whether a Trust beneficiary is nominated or not, or unit holders advised or not, will depend on individual circumstances, so there is no “one size fits all” approach.
How can RVN help you navigate these significant changes?
Given the complexity of the new land tax legislation and the potential adverse land tax consequences, we recommend you contact us to assist you in providing the most tax effective and correct information to RevenueSA.
We are here to help if you need us.