Over the last couple of years, the Office of State Revenue (OSR) has implemented a state-wide review of land tax payable by individuals and organisations, seeking records held by the residential tenancies board, land titles office and state revenue office, as part of its data matching program. Information has also been requested from the land owners personally, often in the form of a questionnaire which they are to complete and return to the OSR.
If you or someone you know has received a request for information from the OSR, or even if you own land and are unsure of whether you are required to pay land tax, how it is calculated or whether an exemption applies, this article contains some general information which may assist you in managing your land tax affairs.
If you have a particular land tax issue and would like to receive some advice, please contact our offices and one of our experienced staff members would be happy to assist you.
WHO NEEDS TO PAY LAND TAX?
Land tax is payable if you own, or jointly own, any property in NSW that is not your principal place of residence (your home) or other ‘exempt land’, as at midnight on 31 December each year, and the total taxable value of your land is greater than the land tax threshold.
WHAT IS THE LAND TAX THRESHOLD?
|Tax Year||Threshold||Premium Threshold||Rate|
|2017||$549,000||$100 plus 1.6% up to premium threshold.|
|$3,357,000||$45, 028 for the first $3,357,000 then 2% over that.|
|2016||$482,000||$100 plus 1.6% up to the premium threshold|
|$2,947,000||$39,540 for the first $2,947,000 then 2% over that|
|2015||$432,000||$100 plus 1.6% up to the premium threshold.|
|$2,641,000||$35,444 for the first $2,641,000 then 2% over that.|
The land tax threshold is assessed each September for the following year. Previous years can be found at http://www.osr.nsw.gov.au/taxes/land/rate
HOW IS LAND TAX CALCULATED?
Land tax is calculated based on the total value of all taxable land.
Different formulas apply for Basic Land Tax, Premium Land Tax and Special Trusts. Sample tax calculations for each type are available at; http://www.osr.nsw.gov.au/taxes/land/calculation.
A company is assessed in the same way as a sole owner unless it is related to another company. For more information on related companies, go to Revenue Ruling – LT 003v2 – Related Companies Section 29 of the Land Tax Management Act 1956.
HOW IS LAND VALUED?
Land is valued by the Valuer General as at 1 July, to apply in the following tax year. The valuation is the average of the current and previous 2 valuations.
Strata units are valued for each individual strata lot calculated on a proportional basis.
If there is a dispute about the valuation of the land, an objection can be made to the Valuer General within 60 days of receiving a notice of assessment. See the Valuer General website for further information. Note, interest may be charged on any outstanding liability.
WHAT IF THERE IS A TRUST INVOLVED?
For land tax purposes, trusts can be divided into six categories:
- special trusts*
- fixed trusts
- superannuation trusts
- trusts created by a will
- concessional trusts
- charitable trusts
* The land tax threshold does not apply to special trusts, which are taxed at a flat rate of 1.6 per cent for amounts up to the premium land tax threshold and then at 2 per cent thereafter. More information on each category of trust can be found at http://www.osr.nsw.gov.au/taxes/land
EXEMPTIONS AND CONCESSIONS:
The following exemptions and concessions apply for land tax:
- principal place of residence
- primary production land
- boarding houses
- low cost accommodation
- residential parks, including caravan parks
- non-profit organisations
- retirement villages, aged care establishments and nursing homes
To qualify for an exemption, certain requirements must be met under the Legislation.
For example, to qualify for the ‘primary production land’ exemption, section 10AA of the Land Tax Management Act 1956 (NSW) requires:
- Dominant Use
The dominant use of the land must be for primary production – for the purpose of selling the produce of the primary production. This applies whether or not it is the land owner that is undertaking the primary production activity or someone else (for example, a tenant).
- Zoning of the Land – Rural etc
For ‘rural’, ‘rural residential’ or ‘non-urban’ zoned land, the exemption applies if the dominant use of the land is for primary production, which includes:
- maintaining animals for the purpose of selling them, their natural increase or their bodily produce
- cultivating crops for the purpose of selling the produce
- keeping bees for the purpose of selling the honey
- growing flowers, orchids or mushrooms for the purpose of sale
- commercial fishing and commercial farming of fish and oysters
- commercial plant nursery, but not including a nursery where the principal cultivation is maintaining plants pending their sale to the public.
- Zoning of the Land – any other zoning classification
If the land is not zoned as rural, rural residential or non-urban, the dominant use of the land must be for primary production, AND meet the ‘business test’ under s 10AA(2) – the land must;
- Have a significant commercial purpose or character based on primary production activities – the size of scale of the activities must be large enough to be considered a business, not just a hobby;
- Be engaged for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).
To determine the zoning of a property, go to https://www.planningportal.nsw.gov.au/find-a-property and simply enter the full address of the property.
To apply for an exemption, an application can be made to the Office of State Revenue. Further information on exemptions can be found at http://www.osr.nsw.gov.au/taxes/land/exemptions.
More information can be found at http://www.osr.nsw.gov.au/taxes/land/factsheet