What are Your Land Tax Obligations
If you hold Freehold Land & Buildings you may be liable for Land Tax.
This tax is administered by the various State Governments and is imposed based on the “land only” value of the property you own.
In NSW property held at 31st December is assessed fully for land tax. Hence if you acquire a property on 30th December, you will be liable for a full years land tax. The converse also applies; that if you sell the property on 30th December, you will not be liable for any land tax.
The rate of land tax varies from year to year and state to state. You can find the current rate for NSW here NSW Land tax rates and thresholds . Bentleys can help you find the rate for other states if you require it.
There are however instances where the rate of tax is different to this, e.g. where the property is held by a “special trust”, or the total property exceeds the premium threshold.
Further some property is exempt from land tax, the most common example of which is the principal residence of a person.
Reporting obligations relating to land Tax are annual at 31st December, where any property sales or purchases must be reported to the Office of State Revenue (OSR), if the entity is currently registered for land tax. If the entity is not registered for land tax it is important to consider if the land value is exceeding the threshold in any given year.
From a planning perspective, it is therefore important to consider the entity that holds any property as it could have detrimental effects on the amount of land tax to be imposed.
Further as many leases for Commercial properties enable land tax to be passed on to a tenant, being current with your land tax obligations can save you from being responsible for this tax after your tenant has left the premises.
Often a land tax clearance is sought by a purchaser on acquisition of a property, hence if land tax hasn’t been appropriately paid over the years, the vendor can be in for a rude shock at the time of sale.
At Bentleys, we can advise you of the land tax impact from a future property purchase in different types of entities.