As you may be aware, there have been some significant changes in recent times to the way in which Unit Trusts are treated for Land Tax purposes in NSW. Prior to these changes, Unit Trusts were entitled to receive the Land Tax threshold in their own right. However, the new default position is that Unit Trusts will be assessed as Special Trusts which means your Unit Trust clients potentially stand to pay up to an additional $5,884 per year in Land Tax.
Despite this policy change by the NSW Office of State Revenue, there are 2 ways in which your Unit Trust clients can continue to receive the NSW Land Tax threshold, namely:
1. By applying the Family Unit Trust Concession (which allows certain family owned Unit Trusts to continue receiving the threshold); or
2. By having your Unit Trust deed reviewed and/or amended where necessary to enable your trust to be considered ‘fixed’ for Land Tax purposes.
To apply the Family Unit Trust concession, the primary requirements are:
- 95% of the units in the trust are held by ‘family members’;
- the total land value held by the trust is < $1 million; and
- the trust has previously been assessed for Land Tax and received the threshold.
For this purpose, the term ‘family members’ is generally limited to individuals that are related by blood or by marriage. There are also certain ‘look through’ tests available if units are owned by a related entity such as a Super Fund.
If your Unit Trust clients are unable to satisfy the above concession, you may want to have your deed reviewed and amendments made so the Trust is considered ’fixed’ for Land Tax purposes. However, it is likely that amendments made to your deed would give rise to resettlement considerations for both Stamp Duty & CGT. Notwithstanding the CGT cost of resettling your trust, any potential CGT liability may be minimised by applying certain CGT concessions. Further, Stamp Duty concessions also exist if you restructure before 31/12/07.
Outlined below is a brief flowchart for your consideration. Lawler Partners is experienced in the area of Land Tax and its application to Unit Trusts, and would be pleased to assist you further in this regard.
