What is Land Tax?
Land tax is a levy imposed on landowners in New South Wales (NSW) as of midnight on December 31st each year. If you possess any property that is not your primary residence, including a vacation home or unit, you may be liable for land tax. This obligation exists even if the property does not generate any income. In general, land used as your primary residence (your home) or for primary agricultural purposes (a farm) is exempt from land tax.
You’ll likely be obligated to pay land tax if you own or co-own:
• Investment properties
• Vacant land, including rural vacant land
• Land with residential structures like houses, residential units, or flats
• Vacation homes
• Company-owned units
• Residential, commercial, or industrial units, including parking spaces
• Commercial properties, such as factories, shops, and warehouses
• Land leased from state or local government
Here are two COMMON scenarios where land tax may become unexpectedly applicable:
• Purchasing your first rental property without registering it for land tax, assuming its value is below the threshold. If the property’s value rises and exceeds the threshold, you may be retroactively charged for missed years of land tax, along with late payment interest.
• Buying a run-down house with plans to rebuild but having to rent a property while waiting for development approval. In this case, you still need to register for land tax with NSW OSR, and if you cannot complete construction within two years, you could be subject to land tax, unless you can demonstrate that the delay was beyond your control.
Amount of Land Tax Due
The amount of land tax you owe depends on the combined value of all taxable land you own or have a stake in, excluding exempt land. The land’s value for tax purposes does not include any structural improvements, such as a house. You do not pay land tax in NSW for properties you own outside the state.
Land Tax Exemptions
Typically, your primary residence is exempt from land tax. However, there are other specific exemptions that may apply (please get in touch with us for more information).
Land Tax Rates rules / thresholds for 2023 are as follows:
• The land tax threshold is $969,000.
• Taxation is $100 plus 1.6% on the land value between the threshold and the premium rate threshold, which is $5,925,000. Beyond this, it’s 2%.
• Even in a partnership, the threshold remains at $969,000.
• If an individual has an interest in a partnership and also owns other land individually or with other partnerships, their interest in the partnership may be assessed.
• No land tax is payable if the combined value of your land does not exceed the threshold.
Companies
Companies are assessed similarly to individuals unless they are affiliated with other companies.
Companies are considered related if:
• One company controls the composition of another company’s board of directors.
• One or more individuals own over half of the voting shares in two or more companies.
• An individual or individuals and a company, in which they are shareholders, have a controlling interest shareholding in another company.
When assessing related companies, the concessional company benefits from the threshold, while each other company (non-concessional) is assessed without the threshold.
To estimate your land tax liability in NSW, you can use this Land Tax Calculator.
If you suspect you may be liable for land tax, please contact us in order that we can assess your situation. Please keep in mind that failure to pay land tax, if required, can result in substantial fines and potential delays in selling your property until your land tax liability is resolved.
For additional information, don’t hesitate to get in touch with our team, or visit the Revenue NSW Land Tax Page.
