Land owners will receive a questionnaire from Revenue SA that must be actioned!
Changes to the Land Tax Act 1936 come into effect on 30 June 2020. Amendments to the Act are focused around changes to aggregation and additional tax on land held in trusts (click here to view).
Importantly, the land tax exemption for the principal place of residence and the exemption for land used for primary production will continue under the new rules.
In anticipation for the changes, landholders are likely to have received correspondence (click here to view) from Revenue SA requesting the landholder confirm relevant details via the RevenueSA Online portal. Details that will need to be provided include:
- the confirmation of the land held and
- details of ownership.
The process will require access to a series of documents to support responses and provide evidence. This may include a trust deed, settlement statement, financial accounts and tax returns.
Where the land is held by a company
Where the land is held by a company (in its own right and not as trustee of a trust), confirmation and details of any related companies is also requested to enable correct aggregation of land held by related companies.
Where the land is held by a trustee for a trust
The correspondence includes the new ‘2020-21 Land Tax Information For Trusts’. This specifically applies where land is held by a trustee for a trust. The information aims to set out the requirements for reporting, and the options relating to nominating a designated beneficiary (of a trust) in order to prevent the higher trust rates of land tax being charged. The option to nominate a designated beneficiary is only available where the trust owned the land prior to 16 October 2019.
The decision on whether to nominate a designated beneficiary of a trust will depend on a number of factors, including (but not limited to);
- whether the beneficiary holds other land in their individual name*
- the nature/use of the land held in trust
- the valuation of the land
* it is critical that all land is identified and considered here including land not rented/deriving income including but not limited to holiday homes and shacks.
Key dates and timeframes
It is important to acknowledge key dates and timeframes for the provision of information relating to Trusts:
- A trustee who owns land on trust as at 30 June 2020, must notify Revenue SA of that trust by 31 July 2020. Also any new land purchased on trust or changes to an existing trust must be notified within one month of the purchase or change.
- A trustee can nominate the designated beneficiary of a discretionary trust no later than 30 June 2021. After this date a trustee will not be able to nominate a designated beneficiary (however, in limited circumstances a designated beneficiary may be substituted). If a nomination is made during the 2020-21 financial year, a trustee can elect if the nomination will take effect from 2020-21 or 2021-22.
At this stage we are recommending clients do not nominate a beneficiary for a Trust (you can skip this step online). We are working through all the implications of making this nomination, including potential Centrelink implications. Unfortunately, every situation is different and due to the complexity of the changes, there is no ‘one size fits all’ solution.
It is important your situation is adequately assessed and reviewed to ensure the best possible outcome is achieved. Therefore, we are planning on working through the beneficiary nominations with clients after 30 June 2020. Noting that the beneficiary nomination can be made at anytime up until 30 June 2021.
We encourage you to please contact PHA Accountants & Advisors to assist and guide you through this process.