Understanding Land Tax and how it applies to Trusts
One of the often overlooked taxes in Australia is Land Tax. This is because it is levied at a State by State level and generally does not apply to your primary residence.
During the COVID pandemic, departments from all levels of government spent time improving data matching and sharing. Couple this with the financial support that was made available at all levels of government and you have the perfect storm for a review to where taxes are not being collected correctly in an attempt to improve the bottom line.
The Victorian State Revenue Office in 2015 announced a surcharge to the standard land tax rates for trusts that held land. Initially 0.5% in 2016, it has increased to 2% from the 2020 year moving forward.
This surcharge has different implications for the trustees of the trust as well. Generally, the trust name will not appear on the records provided to the State Revenue Office (SRO) as the trustee is the listed owner of the land. This has meant that trustees (corporate or individual) must advise the SRO that the land owner is acting in its capacity as trustee and that a higher land tax rate must be charged. Where this has not occurred and in an effort to recoup some of the funds which left the state coffers through the pandemic, the SRO has undertaken a program to identify trustees and recoup the surcharge in a lump sum back to 2016.
We recommend that you seek advice before purchasing a property in a trust from one of the advisers at Salt Financial, to ensure the structure is correct for your situation.
If you would like additional information regarding land tax for properties held in trusts please click the link below.