Land tax – Deceased estates

Land tax as it applies to deceased estates is a complex area.  Various factors need to be considered to ensure appropriate outcomes having regard to the specific circumstances of the deceased estate, the beneficiaries of the estate and, in some circumstances, the use of land.

By working with the executor and/or administrator of a deceased estate (Estate Administrator) and/or estates lawyers, we can assist in ascertaining what may be appropriate outcomes for land tax purposes.

When does liability arise for land tax?

In Queensland, land tax is assessed on land held at midnight on 30 June each year, for the coming 12 months.

Where a deceased owned and occupied land used as their home, then such land will generally be recognised as exempt as at the first 30 June after the date of death.  This may also be the case where land was owned and used by the deceased for another exempt purpose, such as primary production.

If land is still being held by an Estate Administrator more than 12 months after the date of death, then it is likely the Queensland Revenue Office (QRO) will contact the Estate Administrator requesting further information to ascertain how land tax should be assessed.

Factors that may impact the way in which land tax will be assessed on the land include whether:

• a life estate in land has been created under the terms of the will;
• the Estate Administrator is in a position to request the QRO to assess beneficiaries on their respective interests in the land;
• a trust exists under the terms of a will; and/or
• steps have been taken to notify Titles Queensland regarding details of the personal representative and/or if the land should be transferred to beneficiaries.

Life estate under a will

In some instances, when a person dies, they wish to ensure:

• a spouse or child will be able to continue residing in a property used as their home; and
• legal ownership of that property will transfer to all children at a future point in time, including for example on the death of the occupier.

In such circumstances, the nature of the right granted in favour of the spouse or child needs to be carefully considered to ascertain whether it:

• is a right to reside or occupy, or
• constitutes a life estate created under the terms of the will.

A right to reside is generally a personal right or licence but does not constitute an estate or interest in land.  This has important consequences.  For instance, a right to reside contained in a will cannot be recorded on the legal title to the land.

From a land tax perspective, the following implications arise:

• taxable land in Queensland is land that ‘has been alienated from the State for an estate in fee simple’;
• under general law, a ‘fee simple’ means freehold land and a life estate;
• if a person is entitled to a life estate in possession in land, then this person is taken to be the owner for land tax purposes;
• if the person entitled to a life estate continues to use the property as their home, then the land tax home exemption can continue to apply to the property (notwithstanding they will not be the registered owner of the land on title).

It should be noted that where a spouse or dependent has a life estate under a will, the land tax home exemption may still be able to be claimed in limited circumstances, even if the person is required to reside elsewhere to receive care.

Further details on the availability of the home exemption for Queensland land tax purposes can be found by clicking this link to our article on that topic.

Assessing beneficiaries as owners of the land

Where a trust is created under a will, then the executor or trustee may request the QRO to have the beneficiaries assessed for land tax purposes, as if they were the owners of the land.  The effect of such a request (if it is accepted by the QRO) is that each beneficiary will be entitled to a tax-free threshold in each of their names for their respective interests in the land (currently $600,000 per individual) compared to a $350,000 tax free threshold applicable to companies and trusts.

If the request is accepted by the QRO, then provided that the relevant beneficiary uses the property as their principal place of residence, then the beneficiary could apply for the home exemption from land tax in respect of their interest in the land.  Further details on the availability of the home exemption for Queensland land tax purposes can be found by clicking this link to our article on that topic.

Whether a trust exists under the terms of a will

Whether a trust exists under a will (so that a request can be made to have beneficiaries assessed on their interests in the land) depends on various factors, including whether:

• the estate has been fully or partially administered;
• land is being held on trust under the terms of a will;
• whether a trust created under a will has come to an end.

The Queensland Land Court considered the predecessor provisions to the current provisions in the Trustee for Estate of Carmelo Ponticello deceased v Commissioner of Land Tax [1997] QLC 171.  In that case, the deceased died on 19 September 1974. Land tax was assessed against each relevant beneficiary from 1975 to 1995 (ie some twenty years after the date of death).  Land tax reassessments issued to the trustee (not to the beneficiaries) on the basis that any trust created under the deceased’s will had ended when the youngest beneficiary attained the age of 21.  The Court was satisfied a trust existed under the terms of the will and that each of the beneficiaries had an interest in the land under the will. On this basis, given a request for separate assessments to each beneficiary had been made, the Court found that land tax assessments could not issue to the trustee, but should instead issue to the relevant beneficiaries.

Queensland title office records

It is important that relevant forms are lodged with Titles Queensland to ensure land titles are kept up to date, including to record the personal representative on title.

Even where relevant forms have been lodged with Titles Queensland to transfer property to beneficiaries, steps may still be required to:

• ascertain the date on which the beneficiaries were in possession of the land;
• ascertain eligibility for land tax exemptions, including the home exemption; and
• liaise with the QRO to ensure relevant exemptions continue to be recognised.

Assistance

We can assist landowners with:

• ascertaining how the law should apply to their circumstances;
• applying to the QRO to deem beneficiaries of a deceased estate as the owner of land for land tax purposes;
• seeking relevant exemptions, including the home exemption, if applicable;
• applying to QRO, on behalf of persons entitled to a life estate in possession in land, to be taken to be the owner of the land and, if using the property as their home, requesting the home exemption.

For more information, please contact Lyndon Garbutt or Hugo Southcott.