Question
What is the difference between the Fixed Unit Trust and NSW Land Tax Unit Trust?
Answer
Fixed Unit Trust
A Unit Trust is a Trust where the Trust assets are divided into a number of defined shares called "units". The Beneficiaries subscribe for units and become entitled to Trust assets in proportion to the number of units held. Please note that, for CGT purposes, it is the unit itself that is the CGT asset, not interest that the Unitholder has in the underlying property in the Unit Trust.
In a Fixed Unit Trust, there is only one unit class that can be issued on establishment.
NSW Land Tax Unit Trust
If a Unit Trust meets certain criteria contained in section 3A(3B) of the Land Tax Management Act 1956 (NSW), it will not be deemed as a "Special Trust" by the NSW State Revenue Office and will therefore be entitled to the land tax threshold.
When a Unit Trust is fixed for NSW Land Tax Purposes, the unit holders are treated to own the Unit Trust's land in proportion to the number of units that they each hold. That value is added to the relevant unit holder’s landholdings, if any, and each unit holder is assessed for land tax. If the only unit holders are discretionary trusts or the unit holders own other land in excess of the land tax free threshold, there may not be an overall saving. The tax deductibility of land tax should be considered.
Note: If you are not 100% comfortable in setting up a Trust or you do not plan to engage your own solicitor then we recommend you add on legal review to your order.
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