When GST was introduced in 2000, this was meant to replace more
inefficient state taxes. Over the years various timetables have
been set by law for their abolition, and most Australian states
have gone further down that path than NSW.
The NSW Treasurer announced a further extension of NSW State
taxes in his June 12 budget, to compensate for GST revenue not
keeping pace with government services costs.
Firstly this included an extension from the scheduled 1 July
expiry date of loan security duty, being stamp duty on loans
secured over property in New South Wales, other than residential
property. NSW is the only State where this particular duty remains,
and it also causes difficulties where clients arrange a loan
secured over property in several States.
Secondly, the abolition of duty on certain business asset
transfers (including transfers of shares in private companies) has
also been postponed.
Thirdly, the Treasurer has raised the possibility of a new tax
on developed real estate to fund fire and emergency services costs,
in place of the existing insurance tax which only applies to those
who have insurance. This particular proposal would raise, for the
first time, the prospect of regular valuations of improved
property, compared to the unimproved land value used for rates and
land tax purposes.
It would be interesting to see whether such a tax is subject to
the various special arrangements that also apply to land tax,
including the threshold concessional amount of $396,000 for
individuals and for trusts which meet the requirements to be a
"fixed trust" for NSW land tax purposes.
With State taxes seemingly a long term fixture in NSW, land
holders should be considering whether their existing trusts may be
brought within the concession and the desirability of new trusts
being established so as to meet the exemption conditions.
The exemption conditions for a unit trust effectively require
upgrading of the rights of unit holders so that each unit holder
has a veto over most matters. That may be unsuitable for unit
trusts having participants outside immediate family.
The requirements for the land tax friendly trust also include a
reduction in the flexibility normally contained in a unit trust
deed, including restrictions on accumulation of income, redemption
of units and other similar steps.
The conversion of existing unit trusts to be "land tax
friendly" is a possibility for some trusts, but having regard
to potential Capital Gains Tax and other issues, it is important to
select the right form of unit trust at the beginning of a
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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