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- Land tax concession for discretionary trusts has income tax sting in its tail
Land tax concession for discretionary trusts has income tax sting in its tail
- By Joel Lentin
- Published 24/09/2008
- Unrated
Moore Stephens today warned that a concession designed to give discretionary trusts in Victoria relief from new penalty tax rates on land they own has a nasty sting in its tail for the unwary.
Mr Stephen Adrian, a Moore Stephens taxation partner, explained that under new Land Tax Laws, Victorian trusts will be hit with penalty tax rates for land they own at 1 January, 2006.
“The surcharge can be as much as $5,875 per trust per year,” Mr Adrian said. “To soften the blow on trusts with existing land holdings, the new laws allow discretionary trusts to nominate a beneficiary for land tax purposes who can incur land tax.
“On the surface, this may seem like a good idea,” Mr Adrian continued, “and the overall amount of land tax payable by the trust and the beneficiary may be reduced.
“The sting in the tail is that a nominated beneficiary who incurs land tax may not be able to claim an income tax deduction for the amount of that land tax – even though the property is used by the trust to earn rent,” he said.
“This comes about,” Mr Adrian said, “because under the new laws, the land tax is deemed not to have been incurred in producing the beneficiary’s assessable income. If, however, the trust did not make a nomination and incurred the full surcharge amount, it could claim the full amount against its rental income.”
Mr Adrian went on to emphasise the value of good advice before making nominations under the new laws. “This is a complex area which has the potential to trip people up,” he said.
“The best advice is to get good advice to ensure you get the best outcome in your individual
circumstances.”
Part of a global network of 316 independent member firms in 93 countries, Moore Stephens Australia is a top-ten network of six local, independent member firms of business advisors and chartered accountants in all mainland capital cities with annual revenues in excess of $90 million. Moore Stephens provides clients with access to the local focus of firms that know their clients and are an integral part of their local communities, the national strength of resources and expertise across Australia, and the global reach of an internationally connected network.
- ends -
For further information:
Joel Lentin - General Manager, Moore Stephens Australia
Telephone: (03) 9614 4444 Mobile: 0412 105 945
jlentin@moorestephens.com.au
Mr Stephen Adrian, a Moore Stephens taxation partner, explained that under new Land Tax Laws, Victorian trusts will be hit with penalty tax rates for land they own at 1 January, 2006.
“The surcharge can be as much as $5,875 per trust per year,” Mr Adrian said. “To soften the blow on trusts with existing land holdings, the new laws allow discretionary trusts to nominate a beneficiary for land tax purposes who can incur land tax.
“On the surface, this may seem like a good idea,” Mr Adrian continued, “and the overall amount of land tax payable by the trust and the beneficiary may be reduced.
“The sting in the tail is that a nominated beneficiary who incurs land tax may not be able to claim an income tax deduction for the amount of that land tax – even though the property is used by the trust to earn rent,” he said.
“This comes about,” Mr Adrian said, “because under the new laws, the land tax is deemed not to have been incurred in producing the beneficiary’s assessable income. If, however, the trust did not make a nomination and incurred the full surcharge amount, it could claim the full amount against its rental income.”
Mr Adrian went on to emphasise the value of good advice before making nominations under the new laws. “This is a complex area which has the potential to trip people up,” he said.
“The best advice is to get good advice to ensure you get the best outcome in your individual
circumstances.”
Part of a global network of 316 independent member firms in 93 countries, Moore Stephens Australia is a top-ten network of six local, independent member firms of business advisors and chartered accountants in all mainland capital cities with annual revenues in excess of $90 million. Moore Stephens provides clients with access to the local focus of firms that know their clients and are an integral part of their local communities, the national strength of resources and expertise across Australia, and the global reach of an internationally connected network.
- ends -
For further information:
Joel Lentin - General Manager, Moore Stephens Australia
Telephone: (03) 9614 4444 Mobile: 0412 105 945
jlentin@moorestephens.com.au
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