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Office of State Revenue targets trusts in land tax liability review

Publication date: 09 Jan 98 | Source: THE TAX INSTITUTE

In its search for additional sources of revenue, the NSW Office of State Revenue is aggressively targeting land held by trusts and utilising legislation which allows both the trustee and the beneficiaries of a trust to be taxed for the same patch of dirt, according to Taxation Institute of Australia Tax Technical Director, Ms Annamaria Carey.

"This form of 'double taxation' is allowed under the Land Tax Management Act 1956 and should sound as a warning to taxpayers who choose to have land owned by a family trust," said Ms Carey.

"Since the Office of State Revenue's crackdown on land held by trusts began in November 1997, the Institute has become aware of a number of cases where the trustee and beneficiaries of a trust have been found liable for tax on the same property."

"In addition to this, taxpayers should also be aware that the Commissioner of Taxation has the power to reassess earlier years land tax assessments. Where there has not been a full disclosure of all information the Commissioner can go back indefinitely and reassess earlier years assessments."

"In this climate of increased compliance in the area of land tax, this 'open ended' ability should result in substantial additional revenue for the NSW Office of State Revenue," she said.

Figures released in the NSW Government's recent Annual Report indicate land tax revenue has increased by 11.5% in the 12 months to December 1997 topping the $640 million mark.

"Land tax appears to be a real money spinner for the NSW Government and although the percentage of revenue coming from this tax is well below other revenue sources such as payroll tax and stamp duty, this may change in the future as the states consider cost effective ways of increasing their revenue," Ms Carey said.

"These measures on top of the already highly publicised land tax on principal residences in excess of $1 million, could make owning land a very expensive investment for some NSW taxpayers," she said.