DO YOU OWN PROPERTY?
As levied by the NSW Office of State Revenue (OSR); if you own land within the state of NSW you are liable to pay land tax. In order to ensure you are paying the appropriate amounts of this, but certainly not tipping the tax man, there are some important things to consider:
1. Trustees - who is being assessed?
For land owned in a trust or similar, an 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.
2. 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.
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.
3. 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: that 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 land holding.
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.
4. Are all relevant properties being captured?
If all properties owned have not been assessed, you need to complete a registration or variation form; we would be pleased to assist in this regard.
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.
5. 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':
||(A & B are 50% partners):
||Value of partnership land
||Land tax paid by partnership
||Value of land from Partnership X (50%)
||Value of other land owned
||Gross land tax paid by individual
||Less credit from Partnership X (50%)
||Net land tax paid by individual
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.
So how much will I pay?
The 2021 year (year ended 31 December 2020) land tax threshold is $755,000 (up from $734,000 in 2020); the premium threshold is $4,616,000. Land tax is generally assessed at 1.6 per cent 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.