The key changes introduced by the SA Land Tax Bill, which commence from 1 July 2020, include a reduction in the marginal rates of Land Tax, increases to the thresholds at which each rate applies, and new aggregation rules.
We will see the top Land Tax rate drop from 3.7% down to 2.4% with effect from 1 July 2020. Additionally, the top threshold at which this rate kicks in will increase to $1.35m in 2020 and to $2m from 1 July 2022. These changes will bring us closer to the other States, where the average top rate is below 2%.
New aggregation rules will also come into place. The law will assess each owner on the total value of land held in their name, regardless of whether the land is held jointly with others.
Land held by related corporations will also be aggregated and assessed on the total value of the land held by all related corporations. Each company that is a related corporation will be jointly and severally liable for the Land Tax assessed.
Land Tax will be imposed at a surcharge rate for land held in trusts, but trustees may nominate a beneficial owner of the land to access a lower rate of Land Tax.
Other sweeteners are,
A transition fund of $25 million over 3 years to compensate investors negatively impacted by the aggregation measures,
Land Tax concessions for developers holding greenfield and brownfield land for developing 10 or more residential allotments, and
Concessions for land held by eligible developers of affordable housing, where the land intended to be developed will not be aggregated with other land held by the developer.
For discretionary trusts that held South Australian land at 16 October 2019, it will be imperative to obtain advice to consider whether it is advantageous to nominate a beneficiary as the notional “owner” for Land Tax purposes and access the lower rates of tax. There is a fixed deadline of 30 June 2021 to make a nomination under these provisions. Depending on the group structure and asset portfolio, this nomination can create some significant differences in the total Land Tax cost for the group.
Hopefully, now that the Bill has finally passed, we are expecting the market to lift, as confidence in the property sector is restored.