Chan & Naylor’s Managing Partner of business tax accountants in Pymble, Cindy Su, discusses land tax in the November 2018 issue of Your Investment Property magazine.
The popular property investment magazine had asked Cindy to answer one of their reader’s queries about land tax as they plan to sell half of their property under a company title.
Land Tax inquiry
A few years ago, Daniel and his wife purchased his grandparents’ deceased estate under a company title as advised by a solicitor. It was also a requirement by their local Council as they plan to subdivide the property. A few years later, the land tax that they have been paying for their property has become a financial burden as it is their primary place of residence and their ‘company’ is not trading to make money. Therefore, they do not have regular large sums of income to pay for land tax.
Hence, they plan to sell half of their land and continue to live on the other half of their property. Daniel’s question is do they need to pay the full 30% company tax rate if they sell half of their property? Furthermore, he asks if he can close the company title so that they can avoid paying land tax in the future.
Cindy Su’s advice
According to Cindy, if the constitution of their company allows the shareholder(s) exclusive right to occupy a property and all shareholders have been living in that property as their principal place of residence, then the company will not be regarded as the owner of the property as per Section 21A of the Land Tax Management Act 1956. Rather, the shareholders will bear the tax burden if there is no title transfer.
In addition, Cindy talks about three conditions that if met, can allow Daniel to challenge their land tax assessment:
- The shareholders of the company are natural persons
- The shareholders of the company have an exclusive right to occupy the property as the deemed owners/residents as per the company’s constitution
- The shareholders of the company have been living in the property as their principal place of residence
If there is no transfer to a strata/torrens title before selling the other half of the property, the buyer will have to purchase 50% of the company’s shares. So the current shareholders will be selling 50% of their shares which will result in capital gains tax for the current shareholders and not the company.
When ending the business, Cindy advises Daniel to have their property transferred from a company to a strata, stratum or torrens title. She also advises consulting a professional conveyancer to get this done and to overcome any risks.
You can get your copy of the November 2018 edition of Your Investment Property magazine here for more expert property investment tips and advice.
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