What is land tax?
Land tax is the annual tax charged at the end of calendar or financial year on any land that you may own that is above the land tax threshold. Your principal place of residence is exempt, but for other properties you own, your eligibility to claim other land tax exemptions and concessions will depend on how you own or use your land.
Here is a list of different types of use of land and the exemptions eligible depending on your circumstances.
Exemption for a new or different residence
If you have moved to a new property but still own your old home, you may be eligible for a land tax concession if you have:
• Received ownership between 1 July to 31 December in the previous year.
• Started living in the new residence before 31 December of the following year
• Occupied the new property for use as your principal place of residence or occupied by tenants under an existing lease.
If your residence is in the process of building or renovation, you can claim a concession if you:
• Lived in the property for at least 6 months after construction is complete
• Have no generated income during the renovation period
• Use the land for legal purposes only
• Have no other principal place of residence (includes other family members)
Similarly, if you don’t live in a residence that you own or had to move out of your residence due to other reasons. You can claim an exemption if you:
• Lived in the property for at least 6 months
• Have no other principal place of residence
• Only earn income from basic property expenses
• Have not leased out your property for more than 6 months
Exemption for mixed-use property
You can claim a partial exemption if you own a property that is for mixed use which includes, renting out a room from your home, having a home office or workshop etc. For a rented-out room the exemption can only be claimed for the leased part of your property.
Likewise, if you have a home office or workshop that you only use from time to time aside from your business’s primary location you may be exempt, however if you use a proportion of your property more often for your business, you may need to pay land tax.
Properties owned by a company or trust
Properties owned by a company or trust are required to pay land tax. If you are a trustee your eligibility to claim an exemption or reduce the amount you pay can depend on the type of trust you are in.
Properties owned by a Special Trust
A special trust is when an individual trustee is the only person that meets the definition of an ‘owner’ for land tax purposes. This trust does not classify under any other trust definition and can be either a family trust, discretionary trust, unit trusts or a trust created by will. For special trusts, there is no land tax threshold hence, those in a special trust are usually taxed a flat rate of 1.6%, then at 2% once they hit the premium threshold.
Properties owned by a Concessional Trust
A concessional trust is when a trust acquires land specifically for their beneficiaries, this includes someone who is under 18, subject to guardianship or a principal beneficiary of a special disability trusts. In comparison to the special trusts, the concessional trust receives a land tax threshold.
Properties owned by a Fixed Trust
A fixed trust is when the beneficiaries are considered the owners of the land as they are entitled to the income and capital of the trusts. A fixed trust can include unit trusts or bare trusts and are also eligible for the land tax threshold.
Properties owned by a Deceased Estate
Under the deceased estate, when an owner dies, the land tax will be exempt until ownership is transferred to someone else aside from a personal beneficiary of estate or after 2 years of the owner’s death. If there are still people living in the property, land tax can still be exempt if they have approval to live there under a legal will or have been provided permission from the original owner or their personal representative to continue living there.
Other types of lands that have exemptions
• Primary production land – if the land is considered rural, rural-residential, non-urban or is used for primary production and selling of product produced.
• Boarding houses – if at least 80% of occupants are long term or if the property has charges that are within maximum tariffs for the year.
• Low-cost accommodation – if the accommodation is within 5km of Sydney General Post Office.
• Residential and caravan parks – if the residential park is used to provide homes for a community of senior or retired person
• Non-profit organisations – if the purpose of land is within charitable, educational, or religious purposes and there is no business profit for its members.
• Retirement villages – if the land is only partly used as partial exemption eligible. This can be adjusted according to proportion.
• Childcare centres – if the land is used entirely for long day care services, family day care services, outside school hours services or preschool programs.
If you need help with anything, please feel welcome to contact our friendly team at Wilson & Assoc Chartered Accountants.
Source: Revenue NSW
About Wilson & Assoc
Wilson & Assoc Chartered Accountants provides taxation and business advisory services to individuals, investors and businesses wherever you are based. We provide specialist services to startups and health care providers.
If we can help in any way, we’d like to hear from you.
Disclcaimer: The information provided within this article is general information only. None of the comments in these notes are intended to be advice, whether legal, financial product or professional. You should obtain specific advice regarding your particular circumstances from a tax or legal professional.
Copyright © Wilson & Assoc Pty Ltd. All rights reserved.