Following six months of amendments and negotiations with the Legislative Council and industry associations, including the MTA, the State Government was successful in passing its Land Tax Reform Package through State Parliament in December.
While the final iteration of the Land Tax Reform Package is much improved from the initial proposal, some MTA members continue to hold concerns on how the changes will impact their business.
The State Treasurer and RevenueSA have provided detailed information in relation to the changes and we encourage you to review this in an effort to gain a better understanding of what the changes will mean for you and your business.
The Land Tax (Miscellaneous) Amendment Act 2019 includes a package of reforms developed by the State Government and from 1 July this year, there will be new land tax rates and increased thresholds, as well as several other changes to how land tax will be calculated in South Australia, including changes to aggregation.
Click here to access RevenueSA's Land Tax Overview of the Land Tax (Miscellaneous) Amendment Act 2019 document that outlines what the changes are, aggregation, trusts, related corporations, exemptions and ex gratia relief.
Click here to access the updated Land Tax Scales.
Land Tax Reform Package overview
From 1 July this year:
- The top land tax rate of 3.7% will be immediately cut to 2.4%
- The threshold at which the top 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 1.0% from 2022-23 onwards
- The tax free threshold will increase from $391,000 to $450,000 in 2020-21
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 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 case of discretionary (eg family) trusts, the exemption will apply if the nominated beneficiary uses it as their principal place of residence.
Changes to aggregation
If you own two or more taxable properties that do not currently appear on the same land tax bill, they may be aggregated together and appear on the same bill from 1 July this year 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 of pay the higher surcharge rates of up to 0.5%.
The trust surchage 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.
You will not be affected by changes to aggregation:
- If you do not own any taxable land (eg 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 (eg 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 (eg 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 land tax reforms may be eligible for some relief from the Government's $25 million, 3 year Land Tax Transition Fund.
The value of relief will be calculated on the difference in land tax payable on the relevant properties in the current land tax year, compared to the land tax that would have been payable on the properties owned by the taxpayers at the time of the introduction of the Bill under the aggregation approach, tax rates and thresholds that applied in the 2019-20 land tax year. Criteria for the Land Tax Transition Fund are listed below.
- The taxpayer's increase in the land tax bill (subject to the criteria) must be above $2,500 to be eligible relief.
- Relief equivalent to 50% of the increase in the land tax bill in 2020-21, 30% of the increase in 2021-22, and 15% of the increase in 2022-23 will be provided on the increase in land tax above $2,500.
- The maximum level of relief provided will be $50,000 in 2020-21, $30,000 in 2021-22 and $15,000 in 2022-23
- Any taxpayer with an increase in their land tax bill above $102,500 (eg the point where the percentage of relief would be above the maximum level), is not eligible for any relief.
The relief will be administered as an ex gratia scheme with eligible taxpayers required to apply by 31 March in the relevant year. For example, for the 2020-21 financial year, the due date to apply will be 31 March 2021. Taxpayers will also need to be up to date with their land tax payment installments.
To find out more about the land tax changes or to calculate your land tax using RevenueSA's online calculator, click here.
Alternatively, you can call RevenueSA's hotline on 8226 3750 or email them by clicking here if you have any questions.