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Insights / March 7th, 2016

Land Tax - Revenue Ruling LT004

This Ruling represents a change in policy by RevenueSA as they now seek to impose land tax on the aggregated site value of all properties held by an entity, regardless of whether that entity holds real property in its capacity as trustee for multiple discretionary trusts. Previously, RevenueSA had not sought to apply this section to discretionary trusts.

For example, where entity A holds property 1 in its capacity as trustee for discretionary trust 1, as well as property 2, in its capacity as trustee for discretionary trust 2, RevenueSA now seek to impose land tax on entity A based on the aggregate site values of both property 1 and property 2 if the class of income and capital beneficiaries described in the trust deeds of discretionary trust 1 and 2 are similar. As you would be aware, this results in a higher rate of land tax as the aggregation of site values generally pushes the trustee into a higher land tax bracket.

Whilst RevenueSA have only recently changed their position on this issue, it has always been the practice of Cowell Clarke to recommend clients use a different corporate trustee for each discretionary trust which holds real property. We confirm that the new view put forward by RevenueSA will not affect these structures (i.e. structures that involve each discretionary trust having a different corporate trustee).

If any of your clients are affected by this controversial new position taken by RevenueSA, they should seek specialist advice.

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