A tax accountant can provide valuable guidance in navigating the complexities of land tax. Land tax may apply to you depending on where the property is situated. Land tax is a state tax levied on landowners in all states of Australia except for the Northern Territory. Each state has their own rules, rate of tax and exemption threshold, but for the purpose of this article, the focus will be on NSW.
As of 31 December 2015, the land tax threshold for NSW is $432,000. This means land tax is calculated at 1.6% of the land value above $432,000 plus $100. A premium threshold also exists for a land-rich property with a land value over $2,641,000. The only property excluded from land tax is your principal residence (home). If you want to read the FAQs from the NSW Office of State Revenue (OSR) on land tax – www.osr.nsw.gov.au/taxes/land/faq.
Two typical situations where land tax can become applicable without you realising are;
- You purchased your first rental property and failed to register the property for land tax as you assumed the land value was below the threshold. The property’s value goes up and eventually exceeds the threshold, and, as you did not register the property in the first place, you are not assessed for the land tax. In due course, the land tax department will become aware of this (they usually do) and charge you the land tax for the years missed and interest for late payments.
- You purchase a run-down house with plans to knock it down and rebuild a new home for the family. To finance the purchase, you had to sell the current family home and opt to rent while waiting for DA approval. In this situation, you will still need to register for land tax with the NSW OSR, and if you cannot complete the construction of your new home within two years, you could be up for land tax unless you can show that the delay was out of your control.
If you just bought a new property or have an existing one and are unsure whether you need to register for land tax before 31 Dec 2015, please get in touch with us for assistance.
*Correct as of December 2015
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
