Here are some tips how to save land tax.
How To Save Land Tax
In this episode, Geoff Stein of Brown Wright Stein Lawyers in Sydney will discuss your questions about how you can reduce the land tax you pay.
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How To Save Land Tax
Land tax keeps coming. There is no end in sight. So if there is a way to reduce land tax, who wouldn’t? Here are 3 ways to save land tax.
1 – Avoid Discretionary Trusts
A discretionary trust doesn’t qualify for the general threshold – all other entities do. So to save land tax avoid holding property within a discretionary trust.
But if you already hold property in a discretionary trust, you could amend the trust deed and change the trust to a fixed unit trust to save land tax – BUT you would have CGT and stamp duty to consider.
For NSW stamp duty there is a chance that NSW Revenue will waive your stamp duty bill. To find out whether that is the case, submit a deed amendment that has been signed by some but not all required signatories. If your stamp duty bill is nil, you go ahead – otherwise you don’t.
For CGT the amendment will be a CGT event that triggers capital gains tax. However, this is not an additional capital gain but just a claw forward of a capital gain you would make at some stage when you sell – but still a considerable hit to your cash flow since you won’t have sales proceeds to fund the CGT.
2 – Go For Farm Land
Farm land used for primary production is exempt from land tax. But how much primary production do you need to qualify? Make sure the land qualifies for an exemption as predominately used for primary production.
3 – Go For Main Residence
A main residence is exempt from land tax. A property counts as a main residence as long as one of its owners lives in it. The owner living there doesn’t need to own the full property. It could just be a small percentage.
So let’s say you are paying land tax for your beach house. You could sell a small portion (ideally secured by a mortgage) to your adult child who is living in the property. And voila – no land tax to pay.
One Threshold Per Property
You only get one threshold per property and one threshold per entity. So you can’t reduce land tax by bringing more entities onto the title.
There is a primary and then a secondary assessment. The primary assessment will list the property’s land value less ONE general threshold. This is then split among the entities on the title and then run against the general threshold of each individual entity.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 15 March 2021
Tax Talks spoke to Geoff Stein - Partner at Brown Wright Stein Lawyers - for more details.
