DLS Updates – Happy New Year: Land Tax Assessments Coming Your Way

Happy New Year: Land Tax Assessments Coming Your Way

It’s that time of year again.

Landholders in New South Wales should expect to receive their 2018 Land Tax Assessment Notices commencing from January 2018.

The 2018 Land Tax Assessments will be based on the site values of all land owned by the landholder as at midnight on 31 December 2017.

As appeared in the 2017 Assessments a surcharge land tax was charged to foreign persons who are owners of land.

The surcharge land tax is payable in addition to any land tax payable in respect of the residential land payable even if no land tax is payable under those provisions.

There is no tax free threshold and the principal place of residence exemption does not apply to surcharge land tax. Even if an owner is residing in the property, the owner will be liable for the surcharge if the owner is a foreign person.

Who is an Owner of Land for Land Tax Purposes?

To determine who the owner of land is for a tax year, the relevant taxing date is 31 December of the year proceeding the tax year and the persons payable to pay the surcharge land tax of foreign persons will have to pay surcharge land tax in all residential land they own. This includes the issue of property they own jointly.

What is the rate?

The rate of surcharge land tax is 0.75% of the taxable value of residential land. The same taxable value is used for land tax and surcharge land tax purposes, which is based on the three-year average of the unimproved land values determined by the Valuer General.

The surcharge is separately assessed in relation to each parcel of land and each individual interest.

Who is a foreign person for purposes of the New Surcharge Land Tax?

The key is the definition of a foreign person.

A foreign person has the same meaning (with some modification) as in the Foreign Acquisitions and Takeovers Act 1975. A foreign person may thus be:

  • an individual;
  • corporation;
  • a trustee of a trust;
  • a government;
  • a government investor; and
  • a partner in a limited partnership.

Purchasers of residential land in New South Wales will also need to consider the long-term holding costs for residential land in New South Wales having regard to the land tax surcharge.

The definition is exceptionally broad. For instance, residential land will be subject to the charge in the following circumstances:

  • If land is held by a family trust and one of the beneficiaries of the trust is a foreign person (even if that person has never received any distributions from the trust).
  • If land is held by a private company, and one of its shareholders is a foreign person (or grouped together) own or control a substantial part of the shares in the company.
  • If land is held jointly and one of the owners (either as an individual, company, partnership or trust) is within the definition of a “foreign person”.

Purchasers of residential land in New South Wales will also need to consider the long-term holding costs for residential land in New South Wales having regard to the land tax surcharge. (There is also a stamp duty regime imposing additional stamp duty in relation to residential purchases by foreign persons).

How we can assist you?

David Landa Stewart Lawyers can assist you with the following:

  • Review your land tax assessments;
  • Consider whether the “foreign person” surcharge applies to your situation (and if so, consider whether your affairs might be re-structured to eliminate exposure to the new surcharge);
  • Apply for statutory exemptions, if appropriate;
  • Lodgement of valuation objections, if appropriate;
  • Representations to the Office of State Revenue (OSR) regarding any fines or penalties imposed; and
  • Voluntary disclosures to the OSR for non-compliance.

Bear in mind that it is the taxpayer’s responsibility to comply with the land tax scheme – including registering for the new “foreign person” surcharge.

If we can assist you in relation to any of the above or any other business, please contact one of our solicitors on a no obligation basis on 61 2 9212 1099 or send an email to info@dls-lawyers.com.