Land tax is levied on those who own or partly own any property and is applicable everywhere in Australia except the Northern Territory. For land tax purposes in NSW, an owner is defined as:
Similarly in VIC, owners are those who:
During the sale of land, both the existing and incoming owner of the land may be considered the owner for land tax purposes.
You may need to pay land tax if you are the owner, or part owner, of:
In NSW, some types of land are exempt from land tax. These include:
As well as the above land types, VIC also recognises the following as exempt:
Land tax is paid when the total value of land owned as at 31 December, excluding exempt land such as your home, is equal to or exceeds the threshold. The rate, which determines the amount of land tax payable, and threshold figures change each year depending on land value.
In 2017, the NSW thresholds and rates are:
|$549,000||$100 plus 1.6% up to the premium threshold.|
|$3,357,000 and over (Premium threshold)||$45,028 for the first $3,357,000, then 2% over that.|
From 2009 to present, the VIC thresholds and rates were:
|$250,000 to < $600,000||$275 plus 0.2% of amount > $250,000.|
|$600,000 to < $1,000,000||$975 plus 0.5% of amount > $600,000.|
|$1,000,000 to < $1,800,000||$2,975 plus 0.8% of amount > $1,000,000.|
|$1,800,000 to < $3,000,000||$9,375 plus 1.3% of amount > $1,800,000.|
|$3,000,000 and over||$24,975 plus 2.25% of amount > $3,000,000.|
The amount of land tax payable is dependent on the value of land. In NSW, land valuations are conducted by the Valuer General as at 1 July. The land value of the previous year is used for the current tax year. To determine land value, the value for the current year is added to the values of the previous two years where an average is calculated.
For Strata units, land value is calculated on a proportional basis using unit entitlement, for each unit, and the aggregate for the strata scheme.
Land valuations in VIC, however, take place every two years on 1 January and can be performed by either the Valuer General or municipal councils. Details of the land valuation appear in the council rates notice.
In NSW, if you disagree with the valuation of your land, you are able to write to the Land and Property Information (NSW) within 60 days of receiving your notice of assessment. Note that land tax still needs to be paid on the specified date or interest will be accrued.
In VIC, the Valuation of Land Act allows you to object land value within two months from the issue of your council rates notice.
If the value of your land is greater than the threshold, you are required to register for land tax.
In NSW, to you can register:
After you have registered, a notice of assessment will be issued annually which shows the amount of tax payable on your land.
In VIC, there is no need to register as land tax assessments are automatically sent to you between January and May each year.
Although there is no way of avoiding the payment of land tax, some measures can be taken to reduce its value.
As land tax is assessed on a state by state basis and the threshold only applies to property within that state, owning properties in multiple states, compared to owning them in just one state, could minimise land tax.
A Strata unit usually has a much lower land value than a house due to its size meaning land tax could be reduced.
Purchasing properties with different entities, such as owning one property jointly and the other under a trust, is likely to lessen land tax as the tax is payable by each individual entity.
Foreign persons owning residential land in NSW are liable to pay a surcharge of 0.75% from the 2017 land tax year onwards. There is no tax-free threshold for the surcharge land tax. Australian citizens are excluded from the definition of a foreign person.
As at 31 December each year, the surcharge on the taxable value must be paid for all residential land including the principal place of residence. The usual principal place of residence exemption does not apply for surcharge land tax.
According to the Office of State Revenue, a foreign person is:
An individual (who is not an Australian citizen) is taken to be ordinarily resident in Australia at a particular time if:
a. the person has actually been in Australia during 200 or more days of the preceding 12 month period; and
b. at the time:
For land tax purposes in NSW, residential land is defined as:
Note that the surcharge applies if a building has both residential and commercial purposes in which case the land value must be apportioned.
The same exemptions and concessions apply for foreign owners in NSW, except for the principal place of residence exemption.
For more information, you can:
Comasters can assist the client in land tax issues.
© Comasters September 2016. Revised March 2017.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this paper. Our formal advice should be sought before acting on any aspect of the above information.