Changes to Land Tax in South Australia: What all property owners should be aware of!
As part of the South Australian Budget for 2019, a sweeping new scheme has been announced by the State Government which will overhaul land tax assessment in South Australia.
A new draft Amendment bill which will introduce changes to the Land Tax Act 1936 (SA) was released. As of 2 October, the time for public consultation on the draft Bill has closed, and the new laws will hit parliament on 15 October 2019.
As anyone familiar with recent arguments concerning changes to income taxation might be aware of, major changes to a taxation system normally mean that there are winners and losers. On the whole, these changes to land tax are estimated to raise an additional $86 million for the State Government, which implies that in this case there will be more losers than winners.
The first notable change is that the top marginal land tax rate of 3.7% will be progressively reduced, by 0.1 of a percentage point each financial year, until it reaches 2.9% in 2027-2028. This may likely result in a lower land tax bill for land-owners who do not employ a ‘disaggregation’ scheme – see below.
However, this change to the marginal tax rate has been overshadowed by what is probably the most notable feature of the new Bill, which is an amended aggregation scheme for landowners who own multiple properties.
Land tax is typically calculated on the basis of the total value of land held by a single owner. The rate of land tax increases with the value of the land held, between the minimum value of $323,000 (at which no land tax is levied) to the maximum value of 3.7% at $1.087 million.
Previously, landowners who held multiple properties could disaggregate their land holdings into multiple trusts or other entity structures, which creates different ownerships as each entity is a separate taxpayer. This would lead to a lower overall land tax bill.
The new Bill contains more rigorous (some would say stringent) land tax aggregation provisions, which would see these multiple trust structures aggregated into a single tax-paying entity for the purposes of land tax.
This is where the majority of the additional revenue for the State Government is estimated to come from.
There are also provisions in the new Bill that concern an introduction of complex ‘grandfathering’ concessions for existing trust structures, and new rules regarding the land tax assessment of certain trusts, beneficiaries and unit-holders.
This means that, at this time, it can be difficult to pin down precisely what effect the land tax changes will have on land-owners, especially those who own multiple properties.
What is known is that these changes will apply to land-tax payers across the board – though those who own multiple properties may (likely) be hit harder in the long run, anyone who has an interest in residential or commercial property will be affected by the new Bill.
If you are concerned about the changes to land tax assessment or have any questions concerning your interest or investment in property, call Bambrick Legal today for a free no-obligation 30-minute consultation.