Where a beneficiary/unitholder of a fixed/unit trust (but not a discretionary trust) is a trustee of another trust (that is, a beneficiary-trustee) and a notification has been provided of the beneficial interests/unitholders for the first trust, the beneficiary/unitholder will be assessed land tax in the 2 stage process discussed above.

Stage 1 - first trust

The trustee of the first trust is liable to land tax at the general rates of land tax.

Stage 2 - second trust is either a fixed trust or unit trust scheme

If the trustee of the second trust (the beneficiary-trustee) does not notify the Commissioner of the beneficial interests/unitholdings of the second trust, the beneficiary-trustee is liable to land tax at the trust rates of land tax. Alternatively, the trustee of the second trust (the beneficiary-trustee) has the option to notify the Commissioner of the beneficial interests/unitholdings of the second trust.

Where the trustee of the second trust elects to lodge a beneficiary notice, the trustee of the second trust will thereby be liable to the general rates of land tax (and not the trust rates of land tax) and the beneficiaries/unitholders of the second trust will be assessed as notified beneficiaries/unitholders.

Stage 2 - second trust is a discretionary trust

However, if the second trust (or any other subsequent trust) beneficiary/unitholder is a trustee of a discretionary trust, the trust rates of land tax will automatically apply to the interest in the land that the trustee of the discretionary trust is deemed to hold.

In this regard, Section 13A(9) requires that to be considered pre-existing trust land the land must has been subject to the trust as at midnight 16 October 2019.

However, rather than the land being subject to the discretionary trust (that is, the second trust) as at midnight 16 October 2019, the land in this instance was instead subject to the fixed/unit trust (that is, the first trust) as at midnight 16 October 2019.

Consequently, in assessing the discretionary trust for land tax, the land constitutes subsequent trust land and not pre-existing trust land as the land was not subject to the discretionary trust as at midnight 16 October 2019.

For the avoidance of doubt, a trustee of the discretionary trust can still designate a beneficiary and land that was subject to the discretionary trust itself as at midnight 16 October 2019 will be assessed at the general rates of land tax.

If a discretionary trust has an interest in both (1) pre-existing trust land and (2) subsequent trust land (including an interest in land held by being a beneficiary/unitholder of a fixed/unit trust), the land tax assessed would be calculated by using the same formula outlined above (see ‘Land tax on both pre-existing trust land and subsequent trust land’) that proportionally applies general rates of land tax to pre-existing trust land (for land owned subject to the discretionary trust), and trust rates of land tax to the subsequent trust land (land to the fixed/unit trust as at midnight 16 October 2019).

The following 2 examples illustrate the above.


Example 3 - a unitholder of a unit trust (first trust) is the trustee of a fixed trust (second trust)

ABC Pty Ltd is the trustee of the ABC Unit Trust (that is, the first trust), and holds land on behalf of that trust. The trust’s only unitholder, Mr Smith, holds these units as the trustee of the Smith Fixed Trust (that is, the second trust).

Notifications for the first trust (ABC Unit Trust)

ABC Pty Ltd can notify RevenueSA of the unitholder (that is, Mr Smith) and thereby pay the general rates of land tax and not the trust rates of land tax.

Notifications for the second trust (Smith Fixed Trust)

As Mr Smith is a notified unitholder, he is also considered an owner of the land held by ABC Pty Ltd as trustee for the ABC Unit Trust.

It is then mandatory for Mr Smith to notify RevenueSA that he holds his beneficial interest in the ABC Unit Trust on trust for the Smith Fixed Trust.

Mr Smith can then choose to notify RevenueSA of the beneficiaries in the Smith Fixed Trust.

If Mr Smith notifies RevenueSA of the beneficiaries of the Smith Fixed Trust, it will be assessed at general rates of land tax for its interest in the ABC Unit Trust together with any other land Mr Smith holds on behalf of the Smith Fixed Trust.

If Mr Smith does not notify RevenueSA of the beneficiaries in the Smith Fixed Trust, it will be assessed at the trust rates of land tax for its interest in the ABC Unit Trust together with any other land it holds on trust for the Smith Fixed Trust.

Either way, Mr Smith will receive a deduction for the land tax that ABC Pty Ltd has been assessed on the land that ABC Pty Ltd holds on behalf of the ABC Unit Trust.


Example 4 - a unitholder of a unit trust (first trust) is the trustee of a discretionary trust (second trust)

DEF Pty Ltd is the trustee of the DEF Unit Trust (that is, the first trust), and holds land on behalf of that trust.

The trust’s only unitholder, Ms Jones, holds the units as the trustee of the Jones Discretionary Trust (that is, the second trust).

Ms Jones also owns land directly as trustee of the Jones Discretionary Trust.

Notifications for the first trust (DEF Unit Trust)

DEF Pty Ltd can notify RevenueSA of the unitholder (that is, Ms Jones) and thereby pay the general rates of land tax and not the trust rates of land tax.

DEF Pty Ltd will then be assessed on the trust held land at the general rates of land tax.

Notifications for the second trust (Jones Discretionary Trust)

As Ms Jones is a notified unitholder, she is also considered an owner of the land held by the DEF Unit Trust.

It is then mandatory for Ms Jones to notify RevenueSA that she holds her beneficial interest in the DEF Unit Trust on trust for the Jones Discretionary Trust.

If Ms Jones notified RevenueSA, before 31 December 2021, of a designated beneficiary for the Jones Discretionary Trust:

  • the land owned by Ms Jones that was subject to the Jones Discretionary Trust as at midnight 16 October 2019 will be assessed at the general rates of land tax; and
  • the land owned by DEF Pty Ltd as trustee of the DEF Unit Trust, for which Ms Jones as trustee of the Jones Discretionary Trust is liable for land tax (by virtue of DEF Pty Ltd giving notice of the unitholders) will automatically be assessed at the trust rates of land tax for its interest in the DEF Unit Trust. As discussed further above, the land was not subject to the Jones Discretionary Trust as at midnight 16 October 2019 (rather it was only subject to the DEF Unit Trust).

If Ms Jones did not nominate a designated beneficiary in the Jones Discretionary Trust, Ms Jones will be assessed at the trust rates of land tax for both (i) her interest in the land subject to the DEF Unit Trust and (ii) the land she holds on behalf of the Jones Discretionary Trust.

Either way, Ms Jones will receive a deduction that will reduce the land tax assessed against the land held on behalf of the Jones Discretionary Trust equal to the land tax that DEF Pty Ltd has been assessed on the land it holds on behalf of the DEF Unit Trust.