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Legalwise Property 2017 Revised in Full [Shared]

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Ali Alatas

on 23 February 2017

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Transcript of Legalwise Property 2017 Revised in Full [Shared]

1 Overview of Changes 1
Legalwise Seminars
Property Law Seminar Adelaide 2017
2 Overview of Changes 2
3 Non-Realty Abolition 1
4 Non-Realty Abolition 2
5 Commercial Property Duty Abolition
6 Sections 71CC, 71(4) & 67 Changes
7 Section 14(2) & Treatment of Units
8 Non-Realty Example
9 Unit Trust Example
10 Non-Realty Example 2
11 Unit Trust Example 2
12 Section 71CC & Landholder Example
13 Anti Avoidance Example
14 Section 67 Example
15 Commercial (Qualifying) Land Example
17 Date of Sale Example
16 Date of Sale & Walk In Walk Out Changes
Table of Contents
Abolition of Stamp Duty on non quoted financial products - 18 June 2015

Abolition of stamp duty on most non real property transactions - 18 June 2015 (other than applications to register and transfer motor vehicles)

Abolition of prescribed goods - 1 July 2016

Abolition of duty on goods of a landholder - 1 July 2016

Statutory reconstruction relief for companies and unit trusts -

Stamp duty phased abolition on commercial property
One third reduction from - 7 December 2015
Two thirds reduction from - 1 July 2017
Exempt from - 1 July 2018

Reinstate family farm relief involving discretionary trusts - 26 November 2015

Abolition of partition and division exemption in section 71B - 18 June 2015

Off the plan sale of apartments rebate extended to whole State in respect of contracts entered into pre 1 July 2017
Conveyances date of sale amendments - retrospective

Section 14(2) deemed multiple instruments - 18 June 2015

Duty on units abolished from - 1 July 2018

Removal of $1 million landholder threshold - 1 July 2018

Stamp duty relief for charitable and religious bodies varied
Exemption for voluntary conveyances not wholly for commercial or business - 26 November 2015
Exemption for conveyances not wholly for commercial or business - 1 July 2016

Stamp duty concessions for exploration tenements

Stamp duty for Special disability trust residences

Abolition of landholder relief provisions in section 102G(3) and (4)

Abolition of gaming machine surcharge

More anti avoidance provisions
Abolition of Stamp Duty on non quoted financial products from 18 June 2015

Abolition of stamp duty on most non real property transactions from 18 June 2015

Abolition of duty on goods of a landholder from 1 July 2016

Prior agreements and post conveyances are still dutiable

Extended definition of land

an estate or interest in land
an option to acquire land
subject to section 31, the right to acquire an estate or interest in land
mining tenements, pipeline licences and forest property
fixtures at law
items affixed to land

Prescribed goods and a dutiable transaction post 18 June 2015 and pre 1 July 2016
Bernie Walrut
Murray Chambers

Excluded from definition of land
carbon rights
excluded by regulation
transportable home
item affixed to land but not conveyed with the land

Application to leasehold interests or transactions involving them

Goodwill of a site, does it run with the lease or the fee

Care with scope of section 104C(2) and what is not abolished - indirect interests in land outside of landholder (i.e. deceased estates, fixed trusts etc)

Removal of $1 million landholder threshold from 1 July 2018
Commercial property (qualifying land - section 71DC) duty reduction
three year phased abolition by 1 July 2018
first step from 7 December 2015
predominantly used for any purpose other than residential or primary production
Commissioner has regard to VG use code or vacant land and zoning or adopts an approach as should be taken to be so used
Various issues where use codes are not reflective of current use

Commissioner appears to treat the reduced rate as applying to any fixtures or items affixed - there were questions about it application to prescribed goods

Reduced rate applies to landholders and appeared to be applied to included goods of landholder

Rebate provision for duty otherwise paid in South Australia on transaction but not elsewhere (i.e. generally applicable to unit transfers)
Section 14(2) deemed multiple instruments

Without limiting the effect of subsection (1), an instrument relating to types of property that are chargeable with different rates of duty, or relating to a type of property chargeable with duty and a type of property not chargeable with duty, is to be treated for the purposes of this Act as if the provisions of the instrument relating to each of the different types of property were a separate instrument and related only to that type of property.

What does type of property mean?

Is an interest in a trust a type of property or can you look through it to the underlying property (i.e. unit trust, fixed trust, interest through a deceased estate and an object of a discretionary trust)?

What if the trust has debts (see Revenue Ruling SDA003 for aspects):
do they come off
how are they apportioned
what happens if they are secured on some specific property
what happens if there is interstate property and debts

Does s 2(2) impact on this concept?
Reinstate section 71CC relief for discretionary trusts, unit trusts and self managed superannuation funds

Abolition of section 71(4) from 1 July 2018
implications for unit trusts
implications for other trusts

Stamp duty concessions for exploration tenements

Section 67 - deemed to occur at time of earliest transaction

Section 67 - exclusion for different transferors and common transferee from 8 December 2016
A is the 60% shareholder of B Pty Ltd. C holds the other 40%. They are unrelated. B Pty Ltd conducts the business of retailing primary production machinery. The business is conducted from leased land in a major rural city. They have a significant investment in facilities for the sale, servicing and repair of such machinery. Much of the new equipment is on floor plan but the second hand items are generally owned but some may be on consignment. B Pty Ltd is registered in South Australia for the purposes of the Corporations Act 2001 (Cth). A transfers his 60% shareholding to C's family trust for full value after 1 July 2016. What are the duty consequences?
Stamp duty on the transfer of financial products was abolished with effect from 18 June 2015. So no duty is payable on the transfer of the shares in South Australia. The company operates from leasehold land. Do the fixtures and items affixed constitute a tenants interest in the land and if so, is the value in excess of $1 million. If it is then it will be a landholder prior to 1 July 2018. If after 1 July 2018 the interest is likely to be an interest in land that is qualifying land and so exempt, so the landholder provisions do not apply.
18 Date of Sale Example 2
19 Partition, Charities & Off Plan Sales Changes
20 Partition and Division Example
21 Charity Example
22 Charity Example 2
23 Section 62 Changes
24 Corporate Reconstruction 1
25 Corporate Reconstruction 2
26 Corporate Reconstruction Example
27 Land Tax and Primary Production Land
28 Land Tax Primary Production Land Example
29 Land Tax Trust Issues
30 Land Tax Trust Issues Example
31 Land Tax Principal Residence Exemption
32 Land Tax Damaged Principal Residence Exemption
33 Land Tax Reconstructed or Renovated Principal Residence Exemption
34 Land Tax New or Renovated Principal Residence Exemption
35 Land Tax Principal Residence Example
Overview of Changes
Commercial Property Duty Abolition
Sections 71CC, 71(4) & 67 Changes
Section 14(2) & Treatment of Units
Non-Realty Example
Non-Realty Discussion
Unit Trust Example
A is the 60% unitholder of the B Unit Trust. C holds the other 40%. A and B are unrelated and have held their interests for many years. The B Unit Trust conducts the business of retailing primary production machinery. The business is conducted from land owned by the company in a major rural city with a value of $2.5 million. They have a significant investment in facilities for the sale, servicing and repair of such machinery which has a considerable value in excess of the $2.5 million. Much of the new equipment is on floor plan but the second hand items are generally owned though some may be on consignment. The B Unit Trust is established in South Australia; the unit register is in South Australia and the trustee is registered in South Australia. A transfers his 60% unitholding to C's family trust for full value after 1 July 2016. What are the duty consequences?
Unit Trust Example Discussion
The transfer of the units will be liable for ad valorem duty on their net value, if effected prior to 1 July 2018. C and C's family trust are likely to be regarded as a group under the landholder provisions. The acquisition involves the acquisition of a majority interest in the unit trust by the group. Landholder duty will be assessed on the acquisition of a 100% interest in the unit trust (i.e. the group has acquired a prescribed interest). The duty will be computed on the $2.5 million plus the value of the fixtures and items affixed to the land. The value of all goods will be ignored. The land involved is likely to be regarded as qualifying land so the rate of duty at the date of the change (subject to any prior contracts). If prior to 1 July 2018 there will be a rebate for the duty paid on the units and a rebate on the existing 40% as it would have been held for more than three years.
Non-Realty Example 2
E Pty Ltd is granted a lease of hotel premises in a rural town for five years with two rights of renewal at market rent. E Pty Ltd also enters into a contract to purchase the business (i.e. plant and equipment etc, stock in trade and goodwill) conducted on the land from the owner of the land for $3 million. The contract allocates $1.8 million to goodwill, $800,000 to plant and equipment and $400,000 to stock in trade. The plant equipment includes, refrigeration, bars, coolrooms, tables, chairs, kitchen and dinning rooms facilities and equipment. How is it likely to be assessed?
Non-Realty Example 2 Discussion
The grant of the lease is exempt. If any consideration is given for the grant of the lease (other than rent) then ad valorem duty is payable on that consideration. There is no duty on the goodwill, stock in trade and the plant and equipment other than to the extent that the plant and equipment constitutes fixtures or items affixed to the land. The sale of such fixtures and items affixed constitutes a disposal of an interest in land. This could extend to the coolrooms, bars and refrigeration equipment described.
Unit Trust Example 2
The N Unit Trust holds a commercial rental property in South Australia ($3 million), publicly listed shares ($.5m), all of the units in a private unit trust that conducts a fish processing business (stock, plant and equipment, goodwill etc) from leased premises ($2 million) and a fishing boat, licence and quota ($1.5 million). A mortgage of $.5 million is secured against the land with no other liabilities. There are four equal unit holders in the trust. One of the unit holder transfers its unit holding to an unrelated third party. What is the position if the units are transferred to one of the other unitholders? All unitholders have held their interests for more than three years. Is the position any different if $.5 million is an unsecured loan?
Unit Trust Example 2
The total assets of the unit trust are $7 million. The net asset position is $6.5 million. Net commercial real property is $2.5 million. The duty will be calculated on the net real property and a 25% interest passing namely $625,000. As the land is qualifying land the duty will reflect the concessional rate for such land prior to 1 July 2018. No landholder duty is payable. This assumes there is no land interest through the fish processing business.
If the $500,000 is unsecured then it will be pro rated across all assets so $214,285 (i.e.500,000 x (3,000,000/7,000,000)) will be allowed as a deduction against the land component. So, duty will be assessed on $696,428 (i.e. (3,000,000 - 214,285) x .25).

If the acquisition is by a fellow unitholder, then the acquisition will involve the landholder provisions. The duty will be calculated on the acquisition of a 50% interest in the $3 million property (i.e. no allowance for the debt, namely $1.5 million). There will be a rebate for duty paid on the unit transfer and as the units were held for more than three years a rebate in respect of the 25% interest held.

If the acquisition is post 30 June 2018 there is no unit duty or landholder duty as it is commercial real property.
Section 71CC & Landholder Example
A and B are husband and wife conducting an extensive farming partnership cropping extensive broad acres and running a large number of sheep. They have expanded considerably over the years. They have extensive plant and equipment, some very large and expensive machinery and grain holding and cleaning facilities.

Some of the land is in their joint names, some is shown in the accounts as a partnership asset, some land is in a company (A and B are the shareholders), some in a broad discretionary trust, some in a discretionary trust (it does not satisfy section 71CC) and some in a self managed super fund (A and B are the members).

They propose to admit their two sons to the partnership as equal partners. They would also propose to separate much of the land into two discrete holdings to facilitate their succession planning but for the time being retain control.

Section 71CC & Landholder Example Discussion
The land is in joint names so it could be left as it is and dealt with by the will of the survivor. If it is transferred to two 71CC trusts one with son 1 as designated beneficiary B and the second with son 2 as designated beneficiary B then there should be section 71CC relief available, provided other conditions satisfied.

The admission of the sons to the partnership will give rise to a stamp duty consequence in respect of the interests acquired, if capital interests. The duty would be assessable on the interests acquired based on the percentage of the gross value of the land (see Circular 191) whether effected with or without an instrument in view of the Commissioner (arguably no matter that there is no change in the title). However, if the requisite relationship exists then section 71CC may be able to provide relief.

The transfer of the shares will not involve any marketable security duty but will require consideration of landholder duty. If prior to 30 June 2018 then if the value of the land is less than $1 million, then not apply. If after that date, the threshold is $0. As the transaction involves members of the family group or trusts controlled by them then there are grouping issues. If transferred to sons or 71CC trusts then section 71CC may provide relief on a look through basis (section 102F(1)).

Land in the discretionary trust could be left as is. Attempting to split the trust may create issues under section 71(5)(d). They could distribute in specie to one of the parents who could then contribute it to one of the section 71CC trusts, if the relationship exists.
Anti-Avoidance Example
T is the proprietor of a commercial property in a rural city with a value of $5 million. On 30 November 2016 T leases the property to U Pty Ltd for four years with an option exercisable at anytime after 30 June 2018 for U Pty Ltd prior to the expiry of the lease to purchase the property at its market value at the time of the exercise of the option.

Does it make any difference if the option price is the market value at the date of the lease?
Anti-Avoidance Example Discussion
Section 109 contains a general avoidance provision that attempts to deal with arrangements designed to in effect take advantage of the reduction of the rates of duty on qualifying property.

The question is whether the lease an option arrangement has the characteristics of such an arrangement. If the purchase price under the option is the market value as at the date of the lease, then there is a risk that it has the character of an arrangement to take advantage of the relief. If the price is determined as at the time of the exercise of the option I would suggest there is less risk. The purchaser is accepting a commercial risk that the price may be different as well as paying rent.

Section 67 Example
A developer uses a number of different agents to approach adjoining or nearby landowners to buy their properties in the name of the agent.

The various agents then assign the benefit of the contracts to the developer. Notice is given to the vendors and the conveyances are all then in favour of the developer.
Section 67 Example Discussion
Whilst there may be some doubt whether the Commissioner of State Taxation will be satisfied that the persons conveying the land are still acting separately and independently.

The answer provided to the Parliament on this example is that the Commissioner would be satisfied that they are acting independently. So in this situation section 67 will not be applied notwithstanding the land is acquired by one person with a common purpose.
Qualifying (Commercial) Land Example
X Pty Ltd enters into a contract to acquire land in a regional city in an area designated as a mixed use zone. The land is an old vacant commercial building.

The developer proposes to erect a building that has a mix of commercial premises and apartments using the building facade. Does it make any difference if the building has been demolished? Does it make any difference if the land is zoned residential?
Qualifying (Commercial) Land Example Discussion
If the land use as designated by Valuer-General is not residential then the land will be regarded as qualifying land for the purposes of determining the rate of duty. There may be an issue if it is not used, because the requirement of the provisions is that it being predominantly used for that purpose. Though it is not being used, the character of the improvements is not residential, so the exemption should be available.

However, if the land is vacant or vacant with minor improvements and the land is within a zone that envisages use for residential purposes then it is likely to be taken to be used for residential purposes (i.e. it will not be qualifying). If zoned residential and vacant then it will not be qualifying land.
Date of Sale & Rural walk In Walk Out Changes
Conveyances date of sale amendments

the date of sale for all purposes will be the date of the conveyance (s 60A)
consequential amendment where there is an exchange of property (s 65)
consequential amendment to off-the-plan relief (s 71DB)
consequential amendments to section 31
unlimited retrospectivity

SDA008[V3] – interest and penalty only from 18 June 2015

Sections 31 and 31A amendments to conform with date of sale changes and adjudging transfer to dutiable contract

Date of Sale Example
H Pty Ltd as trustee of a family discretionary trust is the owner of broad acres on the edge of a regional city. J Pty Ltd wishes to acquire that land from H Pty Ltd for a subdivision development. It will take two to three years to obtain the planning approvals for the subdivision. It is then proposed to carry out the division in four stages. It is likely that the required development works on each stage will take approximately twelve months. Each stage will take one to two years to sell.

J Pty Ltd proposes to execute an option to acquire the land with the right to exercise the option in respect of each of the stages. H Pty Ltd prefers to ensure that J Pty Ltd is bound to acquire the land if subdivisional approval is obtained. Is there now any difference in effect for stamp duty purposes?

If H Pty Ltd also requires a profit share from the sale of each block in addition to the base price. What is the effect for stamp duty?
Date of Sale Example Discussion
Prior to the amendment to the date of sale provisions, the position (though not always accepted by the Commissioner in practice) was that on a sale the date of sale was the date of the contract. So, the consideration under the contract or the value as at the date of the agreement was the value for the purpose of determining the stamp duty under section 60A.

If an option was taken, then the date of sale was the date the contract was concluded on the exercise of the option. Further, the enhanced value of the land from the subdivisional approval may be taken into account in valuing the land, if the option is exercised after such approvals are obtained.

Now the date of sale is the date of the conveyance for all purposes. So whatever is the date of the contract (i.e. whether arising from a contract or the exercise of the option) it makes no difference, it is the enhanced value, as it is now based on the consideration or value as at the date of the conveyance.

Date of Sale Example 2
In 1984 D agreed by a contract in writing to sell rural land to the corporate trustee of his discretionary trust at its then market value. The contract included all of the required disclosure statements etc. The contract provided that the discretionary trust was granted immediate possession. Over time D has released the corporate trustee by deeds of release of portions of the purchase price under the contract. No part of the purchase price is still outstanding.

D is now elderly and wishes to effect a conveyance of the land to the trustee of the discretionary trust. The market value of the land today is significantly greater. On what basis will the transfer be stamped?
Date of Sale Example 2 Discussion
The amendments to the date of sale provisions have retrospective effect. It would appear that the Commissioner is entitled to assess the transfer on the basis of the current market value of the land notwithstanding:

the date of the contract;
that the consideration payable under the contract as at the date of the contract was its market value;
that the consideration has been fully satisfied.
Partition, Charities & Off Plan Sales Changes
Abolition of partition and division exemption in section 71B
significant impact on family arrangements
now need to fit in other provisions, if you can
watch out for landholder interests in estate

Stamp duty relief for religious bodies varied significantly
transfers to body wholly established for purpose
property not used for commercial purposes
no longer matters whether consideration is involved

Extension of the off plan sales of apartments relief to the whole State. Apartments must be the subject of a contract prior to 1 July 2017, effectively rebate on most of first $500,000 and abate depends on the stage of construction at the time of the contract.
Partition and Division Example
A father and son have been in a primary production partnership for many years. The land was owned by the father. The father dies (his wife predeceased him) leaving the partnership interest to his son but the rest of his property to his son and three daughters. It is a very simple will with little in the way of express powers for the executors.

The daughters agree the son should have the land but on the basis that he gives up his interest in the other residuary estate assets (none involve interests direct or indirect in land). It is proposed to enter into a deed of family arrangement.
Partition and Division Example Discussion
Prior to the repeal of section 71B if the deed of family arrangement was drawn or construed as effecting a division of the property of the residuary estate it and the conveyances to give effect should have had the benefit of section 71B. Now the Commissioner is likely to regard the daughters as conveying a three quarters interest in the land to the brother and assess ad valorem duty.

If the daughters or any of them has the requisite business relationship with the brother, then section 71CC could be used. If the will had a power of appropriation query whether the exercise of such a power could be used and satisfy section 71(5)(h) for an exemption. Also, watch out for the application of section 71AA.
Charity Example
A rural taxpayer wishes to benefit his church and ensure it has a secure income stream in the future. He makes a voluntary disposition of a property to the church.

The property is a small commercial property with a ten-year lease to a commercial lessee. The church will receive the income for the next ten years.
Charity Example Discussion
Based on the amended exemption it appears questionable that this voluntary disposition is free of stamp duty if the conveyance is effected prior to 1 July 2018.

The issue is whether it is a commercial property that is to be used to provide rent and whether its use is of a business or commercial use. After that date the property is likely to constitute qualifying land and be exempt from stamp duty.

Charity Example 2
The trustee of a charitable trust proposes to conduct a lottery with the prize being a dwellinghouse on the Murray. It has contracted to purchase the dwelling from a builder as part of a house and land package.

The builder has given the trustee a 20% discount on the basis that the builder is promoted as part of the lottery. What is the current position? Will the proposed exemption make any difference?

Charity Example 2 Discussion
Prior to the exemption being inserted into the general exemptions it is likely that the Commissioner would have assessed the conveyance as a conveyance on sale based on the market value as at the date of the conveyance. The exemption in section 71(5)(j) (prior to the 2015 amendments) only applied to voluntary conveyances that were voluntary disposition inter vivos. As there was a trust involved, notwithstanding there was consideration payable, it was deemed to be a voluntary disposition inter vivos. But it still may not have been a voluntary disposition. Sometimes ex gratia relief was available.

Following the amendments, the question is whether the acquisition is regarded as the acquisition of a property to that is to be used as a business or commercial use. It is a residential property and the property itself is not to be used for such a use notwithstanding the broader transaction may be commercial. Under the prior regime ex gratia relief would most likely have been granted, so that suggests it will be exempted.
Section 62 Changes
Section 62 - land use entitlements amendments

existing provision repealed

now applies to acquisitions of:
shares
trust interest or
a transaction that confers a right to possession of a dwelling or land

does not apply to retirement village interest or one exempted by regulation

Dutiable as if a conveyance of a fee simple interest less any duty paid on leasehold interest

Corporate Reconstruction 1
Much broader than previous ex gratia relief scheme

Applies from 18 June 2015

Main differences
Applies to unit trusts
No pre or post three year association
No longer requires substantially all assets to be acquired

Discretionary trusts ineligible

Corporation has same meaning as Corporations Act 2001 (Cth)

A person holds property as holder, beneficially owner or control

Unit trust acts through trustee or custodian

A partner is taken to have a proportionate beneficial share

Extends to motor vehicle registration applications
Corporate Reconstruction 2
Corporate group applies to parent company and subsidiaries

Parent corporation must have 90% direct or indirect control

Parent interest measured by voting control

Direct interest is holding the shares and indirect through other(s)

Security interest extends to unit in unit trust

A conveyance or agreement to convey to group member

Applies to landholder provisions but query section 71E

Corporate group interest must not be diminished

Purpose, change in structure or property holding in group

An ineligible trust must not hold property of the group

Must not be part of a state tax avoidance scheme
Corporate Reconstruction Example
M is in control of L Pty Ltd a company that has conducted a manufacturing business from land that it has owned for many years. It also owns some rural land. M also controls a discretionary trust that owns other land used by L Pty Ltd and some rural land.

M wishes to sell the manufacturing business of L Pty Ltd and believes the best way to do that is through selling shares in a clean corporate vehicle. M intends to retain control of L Pty Ltd because of its ownership of the rural land, he intends to go farming. He wishes to effect a restructure for that purpose.

Corporate Reconstruction Example Discussion
M could establish a new company (NewCo) that is a subsidiary of L Pty Ltd. The business assets (other than land) could be transferred to Newco. That transfer would not be dutiable. If M wishes to transfer the business land of L Pty Ltd to NewCo he could use the corporate reconstruction exemption of part 4AA as NewCo and L Pty Ltd are likely to constitute a corporate group.

It is unlikely that the he can use the corporate reconstruction relief for the business land in the discretionary trust. If he can wait until 1 July 2018 it is likely that all of the business land can be transferred as qualifying land and it will not be necessary to rely on the corporate reconstruction relief.

Land Tax and Primary Production Land
Exemptions from land tax for primary production land

land used for primary production outside defined rural area (section 4(1)(l))
land used for primary production within the defined rural area (section 5(10)(g))

Land used for primary productions means land used for the business of primary production

Commissioner of State Taxation v T&S Liapis Pty Ltd
[2015] SASCFC 151

Use and land banking
Land Tax and Primary Production Example
J Pty Ltd has acquired broad acres on the edge of Adelaide from H Pty Ltd as trustee of a discretionary trust for a subdivision development. J Pty Ltd only requires a small portion of the land initially for subdivisional purposes. He arranges with H and his wife to share farm the balance of the land not currently required for subdivisional purposes.

Historically H and his wife in partnership have used the land for cereal cropping and raising sheep. Consider whether the land tax exemption is available if the land is outside the defined rural area and within the defined rural area.
Land Tax and Primary Production Example Discussion
Outside the defined rural area section 4(1)(l) simply requires that the land is used for primary production. The concept of land used for primary production requires that it is more than.8 hectare and that it is used wholly or mainly in the business of primary production. The business of primary production has a specific meaning attributed to it by the Act. The use for cereal cropping and sheep satisfy that if H and his wife are in a business. The question is whether the land is being used for primary production. Section 4(1)(l) does specify who must use the land. H and his wife have been in the business and appear to continue to be in that business. Is that sufficient or must the use be by J Pty Ltd. Is the receipt of a share faring share sufficient in that situation.

Within the defined rural area section 5(10)(g) has additional requirements where the land is owned by a company. It requires the owners of the company or the majority owners (including certain relatives) to have as their main business or engaged substantially on a full time basis in a relevant business. A relevant business requires that the business is a primary production business for which the land is used or for the business of processing and marketing such product. Also, the land or produce must be used to a significant extent for the purposes of such business. There are insufficient facts, but It is difficult to see that the main business of the owners of J Pty Ltd is a relevant business or that the natural person owners (we do not know if natural persons own J Pty Ltd). Are they engaged substantially full time in the relevant business?
Land Tax, Aggregation and Trusts
The aggregation principle does not apply where a person is a trustee of two or more trusts, notice of such trusts is given to the Commissioner and the land is not held for the same beneficiary (section 13(3)(b))

The Commissioner’s views of same beneficiary for a discretionary trust looks to the class of objects entitled to receive the capital, the default beneficiaries are irrelevant and the timing of the establishment of the trust is irrelevant (Revenue Ruling LT004 – Land held on Trust – Section 13(3)(b))

If two or more trustees own land separately but subject to the same trust the Commissioner may treat any one trustee as owner of all of the land (section 13(4))
Land Tax, Aggregation and Trusts Example
P Pty Ltd is the trustee of the P Family Trust and the Q Family Trust. As trustee of the P Family Trust P Pty Ltd owns a rural city building with a site value of $2.5 million and as trustee of Q Family Trust some strip shops with a value of $1.5 million.

The only difference in the class of objects both as to capital and income between the P Family Trust and the Q Family Trust is that the Q Family Trust includes a named charity. P, the promoter of P Pty Ltd is proposing to buy a further property in a new trust with a site value of $2 million, should he use P Pty Ltd. Also, should he do anything about the existing situation.

Land Tax, Aggregation and Trusts Example Discussion
The better approach for P is to establish a new trust with a new trustee with as far as possible a somewhat different class of objects as to capital and income of the trust to acquire the new property. In this way, there is no need to apply for relief under section 13(3)(b). It is also difficult to perceive that section 13(4) would apply in that situation or that the Commissioner could apply Part 6A of the
Taxation Administration Act 1996
(SA).

In respect of the existing arrangement a new trustee could be appointed as trustee of the Q Family Trust. The question is then whether the Commissioner could apply either of sections 13(4) or 18 in that situation or that the Commissioner could apply Part 6A of the
Taxation Administration Act 1996
(SA).

Land Tax and Principal Place of Residence General Exemption
Land that is used as a principal place of residence is exempt or partially exempt where (see section 5(1)(a), (b), (bb) and 5(12)):

the land is owned by a natural person (need not be sole owner), constitutes the person’s principal residence, have buildings that are predominantly residential and less than 25% of the total floor area is used for business or commercial use;

the land is partially exempt where owned by a natural person (need not be sole owner), constitutes the person’s principal residence, have buildings that are predominantly residential and less than 75% and more than 25% of the total floor area is used for business or commercial use.
Land Tax Damaged Principal Place of Residence Exemption
Land that is intended to be used as a principal place of residence is exempt where (see section 5(1)(ab) and 5(11a):

the land is owned by a natural person (need not be sole owner)
the owner ceased to occupy the buildings on the land
has buildings that are predominantly residential that are uninhabitable
that is because of an occurrence that the person is not responsible for or because of an accident
the buildings on the land was the principal place of residence immediately before
the person intends to repair the buildings within three years from their destruction
after reconstruction predominantly have a residential character
the person intends to occupy land after completion of construction
the person is not receiving another principal place of residence exemption
may not exceed three years of exemptions
Land Tax Reconstructed or Renovated Principal Place of Residence Exemption
Land that is intended to be used as a principal place of residence is exempt where (see sections 5(1)(ac) and 5(10b):

the land is owned by a natural person (need not be sole owner)
the owner ceased to occupy the buildings on the land
the buildings on the land immediately prior to the cessation were of a predominantly residential character
less than 25% of the land by floor area is used for business or commercial purposes
after reconstruction, the buildings must have predominantly a residential character
the person intends to occupy land after completion of the reconstruction as the principal place of residence
the person is not receiving another principal place of residence exemption
may not receive exemption for more than two years unless the Commissioner is satisfied for good reason
Land Tax New or Renovated Principal Place of Residence Exemption
Land that is intended to be used as a principal place of residence is exempt where (see sections 5(1)(ad) and 5(10b):

the land is owned by a natural person (need not be sole owner)
less than 25% of the land by floor area is used for business or commercial purposes
the person is or will be renovating or constructing buildings on the land
such buildings will have predominantly a residential character
the person intends to occupy land after completion of the reconstruction as the principal place of residence
the person is not receiving another principal place of residence exemption
may not receive exemption for more than two years unless the Commissioner is satisfied for good reason
Land Tax Principal Place of Residence Exemption Example
T is employed by H Ltd in Whyalla and is posted in November to Sydney for three months on a temporary basis. He leaves his dwelling in Whyalla empty because it is too hard to let and move all his belongings. After the three months, his employer extends the posting for nine months. T decides that he will use the opportunity to renovate his dwelling and engages a builder to so.

The builder indicates he will take twelve months to undertake the renovations. T accepts that. After ten months and some delays the builder goes broke without completing the renovations. T returns to Whyalla after twelve months (the nine months was extended to 12 months) and moves into rental accommodation whilst he sorts out the problems and completes the renovations.
Land Tax Principal Place of Residence Exemption Example Discussion
The first question is whether the dwelling ever ceased to be the principal place of residence. If it never ceased to be the principal place of residence it is not necessary to consider sections 5(10)(ac) or 5(1)(ad). Can it be a principal place of residence once it becomes uninhabitable? The uninhabitable provision of section 5(10)(ab) requires it to be uninhabitable by in effect an accident.

The possible difficulty with section 5(10)(ac)(iv)(A) is the requirement that the person ceased to occupy the land as the principal place of residence because the building on the land was being renovated or rebuilt. There is no such requirement in section 5(10)(ad)(iii), so it would appear to apply subject to the two year time limit unless extended by the Commissioner.
Legalwise Seminars
Property Law Seminar
Adelaide 2017
Bernie Walrut
Murray Chambers
Overview of Changes 2
Non Realty Abolition
Non-Realty Abolition 2
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