Do I have to pay land tax?
Land Tax is a state-based tax on the value of land held on 31 December each year. This blog will focus on New South Wales land tax. The principles and rules referenced here may differ, or not apply in other jurisdictions.
In New South Wales, land tax is applied to:
Land with a house/residential unit built upon it
A holiday/investment property
Land leased from the state or local governments
Residential/Commercial properties including car spaces.
However, land tax is exempt on land which is:
Used as a primary place of residence
Used as a primary place of production (e.g. a farm)
Land which is worth less than the land tax threshold
Who is liable to pay land tax?
Land tax is payable by the owner of eligible land held on 31 December of the preceding year. An owner can be an individual, a partnership, a company, a trustee of a trust, owners of company title units, a beneficiary of a trust (which is not a special trust), among others.
The value of the land is determined on 1 July each year. The value of land which land tax is based on is calculated as the average of the current tax year, and previous two years of land value.
Is my land under the land tax threshold?
The land tax threshold for 2018 is $629,000. If your land is worth less than this amount, your land is exempt from land tax.
There are certain types of owners which are not able to access the land tax threshold exemption. Discretionary trusts (also known as special trusts) have no land tax threshold. Land tax is calculated on the total taxable value of the land.
If the value of your land is greater than the land tax threshold, you will need to register for land tax with Revenue NSW. If you fail to register for land tax, you may receive penalties and interest, in addition to any land tax you have to pay.
How to calculate land tax?
If your land is worth more than the land tax threshold, you will need to pay land tax on the amount of land value over $629,000.
Currently, the rate of tax is $100 + 1.6% of the land value between the land tax threshold and the premium land tax threshold.
Land owned by an individual with a value of $700,000 at 31 December 2017
= $100 + ($700,000 - $629,000) × 1.6%
= $1,236 land tax payable
The premium land tax threshold is currently $3,846,000. Land with a value above this amount is taxed at an additional 2% for the amount above the premium land tax threshold.
If the land is held in a “special trust”, there is no land tax threshold, land tax is calculated based on the total taxable value of the land multiplied by 1.6%
Land owned by a Discretionary Trust with a land value of $700,000 at 31 December 2017
= $700,000 × 1.6%
For the most up to date information on New South Wales land tax, please refer to the Revenue NSW website.
This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice.