DLS Updates – Common Questions regarding Land Tax

Common Questions regarding Land Tax

1. Land Tax Rates - What is the amount of land tax payable?

Land tax rates and land tax thresholds are determined each year by the OSR.

Land tax is calculated on the total value of all your taxable land above the statutory threshold (see below), subject to any exemptions as may apply in the circumstances.

There are two thresholds – the general threshold and the premium threshold. A different land tax rate applies in each threshold.

The general threshold rate is is $100 plus 1.6% of the total land value over the threshold up to the premium threshold.

The premium threshold rate is 2% of the total land value above the premium threshold.

The threshold is published by the NSW Valuer General in October each year and applies to land holdings as at 31 December each year.

You can find the thresholds for the past few years on our dedicated Land Tax section of our website.

2. Valuation objections - There has been a substantial rise in my land valuation. What can I do?

You can object if you believe the land value is too high.

Note that the valuation is based on the unimproved land value, not the improved value as at a certain base date. Certain conditions apply.

The objection must be filed within a particular period of time (60 days of the date of the valuation or assessment), and in a particular form.

An extension of time will only be granted in exceptional circumstances.

3. Re-assessment notices - I have just received a re-assessment for land tax. It goes back a number of years. Why was it issued and can I object?

Yes. A taxpayer has a right of objection. Certain conditions apply.

The objection must be filed within a particular period of time (60 days of the date of the valuation or assessment), and in a particular form.

An extension of time will only be granted in exceptional circumstances.

4. Land Tax Audits - I have just received an audit letter from the OSR in relation to payment of land tax. How do I respond?

An audit letter may have been issued by the OSR for a range of reasons. The best policy is to respond openly, truthfully and within the time period specified.

5. Heritage protected properties - My investment property is heritage protected. Am I entitled to any land tax allowances?

Yes, in certain circumstances.

There is a specific exemption for properties that are listed heritage properties and/or affected by listed heritage items. Certain conditions apply.

6. Mixed Use of the property - I live in part of my home and rent out another part. Am I entitled to a proportionate exemption?

Yes, in certain circumstances. Certain conditions apply.

7. Improvements to the property - I have made very substantial improvements to the property. Should they be taken into account when determining the valuation of the land?

Some improvements should be taken into account.

There is a specific exemption for such improvements. Certain conditions apply.

8. Overseas Job - I have just accepted a job overseas. Will I have to pay land tax on my existing home while I’m overseas?

Yes, in certain circumstances. There is a specific exemption for this particular activity.
Certain conditions apply.

9. Holiday homes - We have a holiday home up the coast that is used solely by the family and has never been rented out and. Is land tax payable on this holiday home as well?

Yes.

A “family” (as defined in the legislation) may only claim one home as their principle place of residence. Land tax will be payable on the other home. It will be a matter of fact and circumstance as to which of the properties is taken to be the families’ principle place of residence for land tax purposes.

10. Defacto relationships - I am in a defacto relationship, how does this impact on the land tax exemption for my home?

Yes.

A “family” (as defined in the legislation) may only claim one home as their principle place of residence. Land tax will be payable on the other partners’ home. Certain conditions apply.

What constitutes a “family” is outlined in the legislation, as is the concept of a “defacto relationship”.

11. Trust ownership - I wish to buy a property in the name of a trust, what are the implications?

There are land tax implications. Some exemptions may not apply if the property is acquired in the name of a trust.

You should obtain advice before proceeding with any purchase.

12. Foreign ownership - I am not an Australian citizen, and not ordinarily resident in Australia. What are the implications if I buy residential land in NSW?

There are land tax implications.

If you are deemed to be a “foreign resident” and acquire “residential land” as defined under the relevant laws, then an additional land tax surcharge may apply. Certain other exemptions may not apply.

You should obtain advice before proceeding with any purchase.

13. Caveat on the title to my property - I have just received a notice in the mail that the OSR has just placed a caveat on the title to my property. Is the OSR entitled to do this?

The OSR has the power to file a caveat on the title to secure repayment of the outstanding land tax liability.

14. Sale of property - I am about to sell a property. Do I still have to pay all the land tax for the current year?

Yes. The land owner is liable for the land tax as assessed.

You may be able to recoup some of the land tax from the purchaser provided this is allowed under the sale contract.

15. Purchase of property - I have just bought an investment property. Do I need to notify the OSR?

Yes. The taxpayer has the obligation to notify the OSR of any acquisition, even if the taxpayer already owns land in NSW.

If there is more than one owner then each owner has an obligation to notify the OSR. Penalties apply for non-disclosure.

16. Change in use of property - I intend to move into one of my investment properties and use it as my home. Do I need to notify the OSR?

Yes. The taxpayer has the obligation to notify the OSR of any change in use. Penalties apply for non-disclosure.

17. Deceased Estates - My mother passed away a few years ago and my father passed away just recently. We intend to sell their home. Does the Estate have to pay land tax because no one is residing in the property?

There are specific allowances for deceased estates, to enable the property to be sold in an orderly fashion.

18. Tax default - what penalties and interest applies for any tax default?

The rates of interest and penalty tax imposed will depend on the nature of the tax default.

The level of interest and penalty tax will match the culpability of the taxpayer. For taxpayers who exercise “reasonable care”, and voluntarily disclose their tax liability as soon as they become aware of it, will have less interest and/or penalty imposed than those taxpayers who do not.

Interest charged has two components. The first is the market rate (as determined by the OSR). The second is the premium rate which is designed to deter non-compliance and to ensure that defaulting taxpayers are not advantaged when compared to other taxpayers who meet their tax obligations.

Penalty tax charged can be anywhere between 15% - 90% of the original assessment, depending on the circumstances. Interest and penalty tax can be reduced or remitted in certain circumstances.

19. Payment arrangements - What if I cannot pay the land tax as and when it is due?

It is possible to negotiate appropriate payment arrangements with the OSR, depending on the circumstances.

If you or someone you know wants more information or needs help or advice, please contact us on 61 2 9212 1099 or email info@dls-lawyers.com.