NSW land tax for smsf?

One of our IPs in a HDT has not been doing very well (not much capital growth after 4 years) and the dreaded NSW land tax has been a real drag on the cash flows. So, we are thinking of getting rid of it.

One thought was to sell it into our smsf (and paying the stamp duty on the transfer). Does anyone know what is the land tax rate for smsf owning investment properties in NSW? Is smsf considered to be a special trust like a HDT? If so, I guess there won't be a threshold and the rate will be 1.6c for each $.

Thanks in advance.

HI there
whilst there have been a lot of changes with self managed funds, I think you will find you will be infringing the in house asset rule if your HDT transfers residential property to the smsf - it will make your super fund non compliant with SIS legislation.
Make inquiries with your Accountant or Auditor of the super fund - but I think you will find this is not a solution to the dreaded land tax problem
thanks

Hi Babushka,

Raddles is correct, if the property is a Commercial Property it will be able to be transferred into your SMSF but you won't be able to do this if it is a residential property, the SIS laws will not allow it.

I believe the land tax in NSW on a SMSF would be the same as for a HDT.

Hi Babuska

This may help you.

For land tax purposes in NSW, trusts are divided into five categories:

fixed trusts

concessional trusts

superannuation trusts

special trusts

unit trusts.

A fixed trust is a trust where the beneficiaries are considered to be owners of the land at the taxing date of midnight on 31 December prior to the tax year. Land tax in 2008 is calculated at 1.6 per cent on the combined value of the taxable land owned above the land tax threshold plus $100.

A concessional trust is a trust where the land in the trust is held for the benefit of a person who is:

under 18 years of age, or

subject to a guardianship order under the Guardianship Act 1987; or

in the 'target group' under the Disability Services Act 1993 (NSW)

Guardianship Act 1987
Disability Services Act 1993 (NSW)
Land tax for concessional trusts in 2008 is calculated at 1.6 per cent on the combined value of the taxable land owned above the land tax threshold plus $100.

A superannuation trust which is a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust under Sections 42, 43 & 44 respectively of the Superannuation Industry (Supervision) Act 1993 of the Commonwealth is calculated in 2008 at 1.6 per cent on the combined value of the taxable land owned above the land tax threshold plus $100. If a superannuation trust is not a complying or pooled trust and is not a fixed trust, it is a special trust.

A special trust is a trust where the trustee is the only person who meets the definition of ‘owner’ for land tax purposes and the beneficiaries are not considered to be owners. If a trust does not meet one of the previous trust definitions, it is a special trust. Examples of special trusts include most family trusts and discretionary trusts. The land tax threshold does not apply to special trusts which, in 2008, are taxed at a flat rate of 1.6 per cent.

A unit trust is a trust in which the unit holders are entitled, under the trust deed, to a fixed proportion of any distribution of income (income units) or capital (capital units) or both income and capital. Generally unit trusts are special trusts. From 2006, 'family-held unit trusts' may be assessed as fixed trusts after completing a 'unit trust declaration form'. Other unit trusts may undertake to restructure the trust deed so as to be then classified as a fixed trust.

Whatever you want to call it you are unable to transfer an already owned residential property into your SMSF.

babushka, mind to say which town the property is in ?

Thank you so much to Raddles, Pat and Qlds007, for your helpful and clearly explained replies and so quickly (only posted the question last night). Understood your views that selling the property into smsf is a no-no. We will have to think of another strategy then - maybe just sell it outright, but there will be other consequences as the property is in a HDT. This is why the land tax is a big issue in NSW - no threshold like in other states (Vic and Qld - for example).

For oasis1frog: the property is in a regional centre in NSW - near Newcastle - about 2 hours drive north of Sydney. It is a growing area, except the house is over 20 years old and there have been a lot of new houses built around it so depressing the house prices in general.

I went to the SIG meeting where MikeF gave a presentation on SMSFs borrowing money to buy properties. A question was raised whether properties in NSW for SMSFs would have the threshold for land tax. I thought that SMSFs would have no threshold on NSW land lax - as is the case for HDTs. But, this was not correct. I have phoned the OSR of NSW and they said yes a complying SMSF would have a threshold, like the individuals, for properties it owns.