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AJML Accountants Update – Guide on Trust Part 12 land tax 1

Guide on Trust Funds – Part 12

About Land Tax

Land tax is a tax levied on the owners of land in New South Wales (NSW) as at midnight on the 31 December of each year. Land tax applies to land regardless of whether income is earned from the land.

Who needs to pay?

You may need to pay land tax if you own, or jointly own, any property in NSW that is NOT your principal place of residence (your home) or other exempt land as at midnight on 31 December and the total taxable value of your land is greater than the land tax threshold.

For land tax, an owner is defined as any of the following:

  • sole owner
  • joint owners
  • a company
  • owners of company title units
  • trustee of any trust
  • beneficiary of a trust which is not a special trust
  • society or organisation whose land is not exempt
  • unit holders with interest in a unit trust which is entitled to the land tax threshold
  • trustees of superannuation funds
  • certain lessees of crown or local council land.

2014 Rates and Thresholds

Tax Year Threshold Rate
2014 $412,000 $100 + 1.6% up to the premium threshold
  $2,519,000 and over (Premium threshold) $33,812 for the first $2,519,000 then 2% over that

How is the value of my land determined?

The Office of State Revenue use land values supplied by the Valuer General, who values your land as at the 1 July. They use the valuation for the year before the tax year, for example, the 2012 value is used for the 2013 tax year.

To determine the value of your land, the land value for the current tax year and the land values for the previous two tax years are added up, then the average is calculated.

Trust Funds

For land tax purposes, trusts can be divided into six categories:

  • special trusts
  • fixed trusts
  • superannuation trusts
  • trusts created by a will
  • concessional trusts
  • charitable trusts

A special trust is a trust where the trustee is the only person who meets the definition of ‘owner’ for land tax purposes, and the beneficiaries are not considered to be owners. If a trust does not meet one of the following trust definitions, it is a special trust.

Examples of special trusts include most family trusts, discretionary trusts, some unit trusts and some trusts created by a will.

The land tax threshold does not apply to special trusts, which are taxed at a flat rate of 1.6 per cent for amounts up to the premium land tax threshold and then at 2 per cent thereafter.

The following trusts receive the land tax threshold:

A fixed trust is a trust where the beneficiaries are considered to be owners of the land at the taxing date of midnight on 31 December prior to the tax year. This is because they are presently entitled to the income and capital of the trust and these entitlements cannot be varied by the trustee in any way. Fixed trusts include some unit trusts and bare trusts.

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.

A trust created by a will is entitled to the threshold. However, if the trust is a testamentary discretionary trust, it will become a special trust 24 months after the date of death of the testator, or such further period as approved by the Chief Commissioner.