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PKF Australia

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Andrew Beattie

Director

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Are you paying the right amount of land tax?

Do you own property? Are you paying the right amount of land tax?

 

If you own property, you may be liable to pay land tax. However, landowners may be overpaying if they have not considered:

Trustees

Trustees - who is being assessed?

For land owned in a trust or similar, an NSW Office of State Revenue (OSR) oversight may assess all properties under the name of the trustee; meaning you may be paying an incorrect amount of land tax. This can occur particularly where you have a trustee acting for more than one entity - for instance a superannuation fund as well as a unit trust.

 Sold properties

Do you still own all properties being assessed?

If you sell a property with a settlement date prior to 31 December, ensure it is not mistakenly assessed. Variations must be lodged before the payment due date.

 Exemptions  

Have you utilised all possible exemptions?

All land (including strata units) is subject to land tax, even if not income-producing, unless it falls under any of the following exceptions:

  • Used as a principal place of residence (maximum of one property)*
  • Rural zoned land used for primary production
  • Non-rural zoned land used entirely for primary production
  • Used and occupied primarily for boarding houses
  • Used for retirement villages and aged care facilities
  • Owned by charitable or religious institutions  

* Where land is used for both principal residence and income-producing purposes, the income-producing component will be subject to land tax.

 Fair value assessment

Is the value assessed fair?

Land in NSW is subject to regular valuation by the Valuer General, who provides updated notices to landowners every three years on average. Most land is valued using a “mass valuation” technique based on recent sales in the local area. Note: only land is valued – not buildings or other improvements.

Given this “mass” approach, valuations can be open to queries - for instance where land has particular features that impact its value. Even the Valuer General accepts that in some circumstances the technique may lead to an overstatement. It is difficult for the Valuer General’s office to consider all relevant factors for each individual landholding.

As a result, Part 3 of the Valuation of Land Act 1916 (NSW) provides for an objection process for the review of land values. Given significant property market movements recently, it is important to check your property land value is realistic. Note that objections must be lodged within 60 days of the issue date of assessment.

 Multiple properties

Are all relevant properties being captured?

If all properties owned have not been assessed, you need to complete a registration or variation form.

Penalties apply for failing to register and pay land tax - any outstanding liability would be identified on a property sale, when land tax clearance is requested.

Ownership

Level of ownership

Are you or any related entities in a situation where 'look-through' applies? For example - where a property is owned in a partnership, the land value is assessed also to the individual partners, with a credit for any land tax paid 'up the line': 

Partnership X   (A & B are 50% partners):

Value of partnership land                                $800,000

Land tax paid by partnership                           $1,156

Individual A:                 

Value of land from Partnership X (50%)            $400,000

Value of other land owned                               $700,000

Gross land tax paid by individual                      $5,956

Less credit from Partnership X (50%)               $(578)

Net land tax paid by individual                         $5,378 

Note: where more than one property is owned by the partnership or respective individuals, a secondary calculation method will also be applied and the credit equated to the lower of the two calculations.

 

How much will I pay?

The 2020 year (year ended 31 December 2019) land tax threshold is $734,000 (up from $692,000 in 2019); the premium threshold is $4,488,000.

Land tax is generally assessed at 1.6% of the taxable value above the land tax threshold (if eligible) plus $100, and 2% above the premium threshold.

You can pay three instalments, or in full with 1.5% discount by the first instalment due date.

Contact your PKF adviser:

  • If you haven't reviewed your land tax assessments closely in some time (especially if you have indicated you do not require our expertise in this area)
  • If you or your related entities own property outside New South Wales (NSW) (note all Australian states impose land tax obligations) (the above rules apply to NSW only)

Should you have any queries in relation to the above or wish to discuss further, please do not hesitate to contact us on 02 4926 2688.


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