Depending on where the property is situated, land tax may be applicable to you. Land tax is a state tax levied on the owners of land 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 at 31 December 2015 the land tax threshold for NSW is $432,000. This means that land tax is calculated at 1.6% of land value above $432,000 plus $100. A premium threshold also exists for land rich property with land value over $2,641,000. The only property excluded from land tax is your principal place of residence (home). Click if you want to read the FAQs from NSW Office of State Revenue (OSR) on the topic of land tax – www.osr.nsw.gov.au/taxes/land/faq.
Two common situations where land tax can become applicable without you realising are;
- You purchase your first rental property and fail to register the property for land tax as you assumed that the land value was below the threshold. The value of the property 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 become aware of this (they usually do) and charge you the land tax for the years missed as well as interest for late payment.
- You purchase a really run down house with plans to knock down and rebuild a new home for the family. To finance the purchase you had to sell the current family home and opted 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 contact us for assistance.