Land Tax and Duty Risk for NSW Farming Land in Trusts

November 20, 2020

We have previously issued a bulletin on the risk of surcharge duty and land tax becoming payable on residential land in NSW held by a discretionary trust.

The same risk applies for primary production land if part of that land is used for a purpose other than primary production.

In yesterday’s bulletin, we noted that diversification could inadvertently cause land to lose is primary production status, if the non-primary production use could be classified as the main use of the land (to read more, click here).

The additional risk now is that if that land loses its primary production status, and the land is held by a discretionary trust that does not irrevocably exclude foreign beneficiaries, the 2% land tax surcharge will be payable on the taxable value of all the land, including that part that is used for primary production.

It is therefore important that if you hold or intend to acquire, in a discretionary trust, land in NSW on which an activity other than primary production is carried out, you seek advice as to the land tax and duty surcharge implications.

For existing holdings, you have until 31 December 2020 to make changes to your trust deed to avoid paying surcharge land tax.

If you are purchasing land, you must change your trust deed before signing the contract to avoid paying the surcharge purchaser duty (currently 8% of the market value of the property).

If you have a trust that owns mixed use primary production land in NSW or you are planning to use a trust to purchase that type of land, please contact our commercial team as soon as possible.