A trust is an arrangement where a trustee manage or hold a property for the benefit of one or more individuals or organisations (known as a beneficiary). The trustees have a duty to the beneficiaries, who are the ‘beneficial’ owners of the trust property.
A trust may be liable for land tax and/or surcharge land tax.
You may be able to reduce the amount you pay by claiming the land tax threshold, depending on the type of trust.
You’ll need to register your trust for land tax and provide the following information:
The way trusts are treated for land tax purposes, is outlined below.
State Revenue Legislation Further Amendment Bill 2019 – Surcharge Land Tax on Discretionary Trusts
The State Revenue Legislation Further Amendment Bill 2019 contains provisions which clarify when a trustee of a discretionary trust is liable for surcharge land tax (or surcharge purchaser duty, as the case may be).
Trustees that may have inadvertently incurred surcharge land tax may receive an exemption (or refund) if their trust deeds are amended in accordance with the legislation. New deeds will need to meet the requirements of the legislation in order to avoid any surcharge liabilities. The Bill currently requires affected deeds to be amended by 31 December 2019.
As the Bill has yet to be passed by the Parliament, the Government intends to extend this deadline to a later date, in 2020. However, trustees are encouraged to amend their deeds by midnight 31 December 2019, if possible, to avoid incurring a land tax surcharge liability and having to apply for an exemption or refund.
Special trusts do not receive the land tax threshold. They 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.
A special trust is when a trustee is the only person who meets the definition of an owner for land tax purposes and beneficiaries are not.
A special trust must meet one of the following trust definitions as per Section 3A of the Land Tax Management Act, 1956:
Fixed trusts are eligible for the land tax threshold.
A fixed trust is where the beneficiaries or unit holders are considered owners of the land as at the taxing date. 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 (Fixed trust has the meanings given by Section 3A (2) and Sections (3A) and (3B) of the Land Tax Management Act, 1956).
To qualify as a fixed trust, the trust deed must satisfy the following ‘relevant criteria’:
Unit trusts that do not meet the relevant criteria and are special trusts are able to restructure their trust deed to be considered a fixed trust for future tax years.
To make sure your amended deeds meet the requirements, go to our secure online portal and upload:
Before you amend a trust deed, we always recommend seeking professional financial and legal advice.
Learn more about amending a unit trust deed in Commissioner’s Practice Note: Unit Trust Deed Amendments.
If a trust satisfies the relevant criteria the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land.
Under section 25 of the Land Tax Management Act, 1956, owners of an equitable estate or interest in land are liable in respect of land tax as if they were legal owners of the land. Owners of an equitable estate in land are treated as secondary taxpayers.
Therefore a unit holder’s interest in the unit trust, who owns other taxable land, or is a special trust, are assessed on the combined value of their interest of the land held in the trust and any other taxable land owned.
They may be entitled to a secondary deduction to prevent double taxation.
All fixed unit trusts must provide details of the unit holders.
A unit trust may be a special trust, a fixed trust or a family unit trust.
To be a fixed trust, certain criteria apply. If these criteria do not apply, the trustee may restructure the trust deed to meet the criteria but the threshold will only apply from the next tax year.
Unit trusts must meet the relevant criteria contained in section 3A(3B) of the Land Tax Management Act, 1956 to be considered a fixed trust.
A trustee must lodge a land tax return, if the land is subject to a trust (Section 12 (1C)) of the Land Tax Management Act, 1956. A copy of the trust deed should be lodged with the return.
If a beneficiary or a unit holder owns other taxable land, or is a special trust, they are assessed on the combined value of their interest of the land held in the trust and any other taxable land owned. They may be entitled to a secondary deduction to prevent double taxation.
A bare trust is a type of fixed trust where the trustee and defined beneficiaries have complete control of the trust.
Given their structure, the land tax implications of bare trusts vary.
Superannuation trusts receive the land tax threshold. A superannuation trust can be
If a superannuation trust is not a complying or pooled trust and is not a fixed trust, it is a special trust.
A trust created by a will receives the land tax threshold. However, testamentary discretionary trusts become a special trust two years after the date of the testator’s death, or a further period as approved by the Chief Commissioner of State Revenue..
Family unit trusts receive the land tax threshold. A family unit trust is classified as a fixed trust
A family group consists of persons:
Certain criteria must be met to continue to qualify as a family unit trust. Family unit trust has the meaning given by Schedule 1AA (2) of the Land Tax Management Act 1956).
Concessional trusts – as defined by Section 3B of the Land Tax Management Act 1956 – do receive the land tax threshold.
These are trusts that hold land for the benefit of someone who is:
If you have more questions about trusts and land tax, contact us.