The South Australian Land Tax (Miscellaneous) Amendment Act 2019 has now been enacted and includes a package of reforms developed by the State Government. Read on...
From 1 July 2020, there will be new, lower land tax rates and increased thresholds, which will mean that 92% of individuals and 75% of company groups will be pay less land tax according to the State Government.
The directors of a dormant company remain subject to the same legal obligations relating to the affairs of the company as would be the case for an actively trading company.
- The top land tax rate of 3.7% will be immediately cut to 2.4%
- The threshold at which the top tax rate of 2.4% will apply in 2020-21 will increase to 1.35 million and then increase to $2 million in 2022-23.
- A new lower tax rate of 2.0% will apply from 2020-21 for site values between about $1.1 million and $1.35 million and then in 2022-23 from about $1.1 million (indexed) to $2 million.
- The tax rate for site values between about $755,000 and $1.1 million will be cut from 1.65% to 1.25% in 2020-21 and then to 1.0% from 2022-23 onwards.
- The tax-free threshold will increase from $391,000 to $450,000 in 2020-21.
Land tax is based on the site value of the land, which does not include buildings or other improvements to the land. Many people own properties which have a total site value below the tax-free threshold. As a result of the increase in the tax-free threshold from $391,000 to $450,000, an estimated 9,300 taxpayers will no longer pay any land tax.
Land that is currently exempt from land tax, for example, a person's principal place of residence and land used for primary production, will remain exempt from land tax. Further, the principal place of residence exemption will be expanded. Land will be exempt from land tax in the case of fixed and unit trusts if all beneficiaries or unitholders use it is as their principal place of residence, where a notification of beneficial interests is in force. In the case of discretionary (i.e. family) trusts, the exemption will apply if the nominated beneficiary uses it as their principal place of residence.
New Land Aggregation Rules
The reforms also include changes to how land is aggregated together similar to laws existing in other states like Victoria. Aggregation has been a feature of the South Australian land tax system ever since land tax has been collected. In simple terms, aggregation means when the site value of all land owned by the same taxpayer is combined to calculate land tax. If you own two or more taxable properties that do not currently appear on the same tax bill, they may be aggregated together and appear on the same bill from 2020-21 onwards under the changes.
Land held in certain trusts may also be subject to higher surcharge rates of land tax. Trustees can nominate the beneficiaries or unitholders of a trust for land tax and be subject to the general rates of land tax or pay the higher surcharge rates of up to 0.5%.
The trust surcharge will be capped at a fixed amount each financial year, depending on the land tax thresholds. In 2020-21, the trust surcharge will be capped at a maximum of about $6,500. If a trustee chooses to nominate the beneficiaries or unitholders for land tax purposes, the beneficiary's interest in land will be aggregated with any other interests in land that they own.
When do the land tax aggregation rules not apply?
If any of the following circumstances applies to you, you will not be affected by the changes to aggregation:
- If you do not own any taxable land (e.g. if you own only one property and that is your principal place of residence) you will continue not to be subject to land tax.
- If you own your principal place of residence and only one taxable property, you will not be impacted by the changes to aggregation.
- Family members (e.g. you and your spouse) who each own a taxable property in their own name will not be aggregated together.
- Self-managed superannuation funds will not be liable to pay a trust surcharge and will not be aggregated (except where already currently aggregated).
- If you own one property as a natural person, one property in a company that you own and one property in a family trust where the trustee has chosen to pay the trust surcharge, your land will not be aggregated together into one, single group.
- Land owned in different discretionary (i.e. family) trusts will not be aggregated together if the trustees opt to pay the trust surcharge.
- If the total site value of all the taxable land you own is below the tax-free threshold ($450,000 in 2020-21) you will not be impacted by aggregation.
Taxpayers whose land tax liability does increase as a result of the reforms may be eligible for relief from the Government's $25 million, 3 year Land Tax Transition Fund.
Visit www.revenuesa.sa.qov.au/LandTaxChanges to find out more about the land tax reform package or calculate your land tax using their online calculator. Alternatively, you can get in touch by calling the RevenueSA hotline on 8226 3750 or sending an email to firstname.lastname@example.org.
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Please note this article is for information purposes only and does not constitute legal advice. Should you have any queries or require more information, please contact the team at ABNAustralia.com.au.