March 5, 2019

Professionals | QLD

In certain circumstances, a “home exemption” for land tax may be available for trustees of discretionary trusts. Trustees of discretionary trusts which own properties used as a beneficiary’s primary residence should consider whether the requirements for the land tax home exemption are satisfied. 

Where a trustee has claimed the home exemption and the Office of State Revenue has approved it indefinitely, the trustee should, prior to the end of each financial year (regardless of whether or not distributions are being made), confirm that the requirements for the exemption have and will continue to be satisfied. 

WHEN CAN A TRUSTEE CLAIM A LAND TAX HOME EXEMPTION?

The Land Tax Act 2010 (Qld) (Act) provides for an exemption for land tax where:

  • land is owned by a trustee of a trust;
     
  • the trustee is not an absentee; and
     
  • the land is used as the home of all beneficiaries of the trust.

An “absentee” includes a person who does not ordinarily reside in Australia. This includes persons who do not usually live in Australia and, on 30 June, is absent from Australia or who has been absent for more than half of the 12 month period ending on 30 June. 

The “beneficiaries” of the discretionary trust are either:

  • those persons in whose favour a power of appointment has been exercised in the 12 month period before 30 June; or
     
  • if there is no exercise of the power of appointment (e.g. because there is no income of the trust), the default beneficiaries of the trust. 

The requirement is clearly stated that it must be used by ALL beneficiaries of the trust and therefore it must be used by all default beneficiaries. This can be problematic where there are multiple default beneficiaries. 

Because land tax is assessed on the basis of land held as at 30 June each year, and in respect of the year in advance (i.e. not retrospectively), the trustee will need to ensure that the requirements of the exemption are met for the 12 months prior to the relevant 30 June. This can prove difficult where:

  • distributions have been made in a period before the land was acquired; or
     
  • there is income for distribution and it has not (or will not) be distributed only to the beneficiary who occupies the land.

WHAT SHOULD A TRUSTEE DO IF THE REQUIREMENTS ARE NOT SATISFIED?

If the Office of State Revenue has granted the exemption and provided notice, the exemption will continue to be applied unless there is a change in circumstances which results in the exemption no longer applying. 

The trustee must notify the Office of State Revenue of the change within 28 days of it occurring. 

Changes can include, the property ceasing to be used as the home of the beneficiary/beneficiaries, the property being rented or a business being operated from the home (which may result in only a partial loss of the exemption).

HOW CAN MCINNES WILSON LAWYERS HELP?

McInnes Wilson Lawyers can assist with a range of matters including:

  • applications for the exemption;
     
  • upfront structuring for property purchases to ensure that the exemption is available (e.g. the trust deed, the purchase of the property) and steps to take to ensure the ongoing satisfaction of the requirements for the exemption;
     
  • notification to the Office of State Revenue that the exemption no longer applies and, if appropriate request a reassessment and mitigate penalties and interest (if applicable).