Have the latest changes to SA’s Land Tax Legislation left you feeling confused? Don’t worry, you’re not alone! In this article we explain a little more about what land tax is, what the changes mean, and who the winners and losers are.

So what is land tax?

In very simple terms, land tax is a state tax you pay on land you own as an investment, not for land that serves as your principle place of residence.

It is calculated using a progressive rate structure, based on the value of the land you own, and this calculation is made on 30 June each year.

The tax is calculated based on the combined total of all properties you own, and different rates apply depending on whether the land is owned through a Trust or not.

What has changed for 2020/21?

You might have heard discussions about changes (particularly reductions) to land tax in the media over the last few years, and this has finally come to fruition for 2020/21.

In addition to a reduction in the tax rate for most of the thresholds, the threshold brackets have moved, meaning your properties may now fit into a lower threshold than previously.

The biggest change comes for those who own more than one property, due to the new aggregation provisions. Previously, land held in different entities had been assessed separately, meaning each property would have fitted into a lower threshold. Now, the total properties are aggregated together, regardless of the ownership structure, meaning they will likely fall into a higher threshold.

Who are the winners and losers with the new changes?

The changes impact different people in different ways. In our opinion, the winners from this restructure are:

• People who own properties between $390,000 and $450,000
  • Given the increase in the lowest threshold, properties in this bracket are no longer subject to land tax. Given the minimal increase in property prices over the last year, this means there will be many people who no longer have to pay any land tax!
• Owners of properties over $755,000
  • The tax rates for the three highest thresholds have all decreased. In particular those in the top threshold get a win with the rate reducing from 3.7% to just 2.4%.
• People who own properties in excluded and exempt trusts
  • Examples of exempt trusts include superannuation, charitable or concessionary trusts. The exemptions here mean that they only have to pay the general tax rate, rather than the higher tax rate for other types of trusts.

We’re sad to say the losers from these changes are:

• Those who own land in trusts
  • In general, those who own land in trusts are the biggest losers, with new rates introduced for land owned in this way. Not only are the tax rates higher for all the different thresholds, there is also a threshold for property valued between $25,000 and $450,000. Those who own property of this value in other ways don’t have to pay any tax at all, but this is not the case for trusts.

• People with multiple individual aggregated land holdings
  • There have been changes to the way land is now aggregated, meaning most people with multiple properties, regardless of the legal structure, will now fall into a higher tax threshold.

With so many different rules, exemptions and ownership classifications, there’s no doubt that it can be confusing to know how the changes impact you directly. For more specific advice, please don’t hesitate to contact us on 08 7226 8033 or at sue@easternconvey.com.au, as well as your accountant or solicitor. You can also check out some of the useful links below.

RevenueSA Land Tax Changes

RevenueSA Land Tax Rates and Thresholds

RevenueSA Land Tax Calculator

Disclaimer

The comments above are of a general nature only and are not intended to be, and should not be regarded as, legal advice. For legal advice on your specific circumstances, you must consult a suitably qualified professional advisor.