What you need to know about the approaching land tax deadlines: Clive Nelson

GUEST OBSERVATION

Land tax is a tax levied on the owners of land as at midnight of the relevant date of each year depending on the state in which the property is located (refer below for dates for respective states).

Land tax may apply to land regardless of whether income is earned from the land depending on the state jurisdiction applicable. Each state is responsible for the calculation and collection of land tax and it is only applied to land held in a respective state.  (The tax is not applied to cumulative holdings of land across Australia.)

Assessment Dates     

•    NSW – 31 December
•    VIC - 31 December
•    QLD – 30 June
•    SA - 30 June    
•    WA - 30 June
•    TAS - 30 June
•    ACT - 30 June

Note: NT does not apply land tax

Land Tax Registration

It is a requirement for individuals and entities to register their interests in land with the respective State Revenue Office (OSR).  

In some states this a requirement regardless of whether the individual or entity is below any land tax threshold. For example, many self-managed superannuation (SMSF) trustees have acquired investment property during the past few years (this includes SMSFs that have acquired their own business premises).  

The acquisition of one investment property would often result in the land value of this investment being below the respective land tax threshold. Regardless the SMSF trustee may be required to register the entity’s interest in the property with the appropriate OSR. The same principle applies for all individuals and entities. 

It is not essential to derive income from a property to have it subject to land tax. A holiday home used exclusively by the family may be subject to land tax and be subject to registration.

Land Tax Thresholds and initial rate for values above threshold

•   NSW: $432,000  -  $100 + 1.6% per $ (scaled)
•   VIC: $250,000    -  $275 + 0.2% per $ (scaled)
•   QLD: $599,999   -  $500 + 1% per $ (scaled)*
•   SA:  $316,000    -  0.5% per $ (scaled)
•   WA: $300,00      -  0.11% per $ (scaled)
•   TAS: $24,99       -  $50 + 0.55% per $ (scaled)                           
•   ACT: $1             -  0.41% per $ (scaled)

Refer to the respective state Office of State Revenue (OSR) for further information (website details set out at the end of this article).

* (individuals only)

Other state specific exceptions:

•   NSW - Special trusts – zero land tax threshold
•   NSW - Fixed property trust – individual land tax threshold
•   VIC - Special trusts - $25,000 land tax threshold and separate scaled rates
•   QLD - $349,999 threshold for trusts, companies and SMSFs.

NSW & Victoria apply different rates and thresholds for trusts.

In NSW, trusts (with the exception of fixed property trusts (FPT) and SMSFs) do not receive a land tax threshold and are described as “special trusts”. These include: discretionary, hybrid, unit and Property Investor trusts. Land tax is applied at a rate of 1.6% from the first dollar up to the premium land tax threshold and then at 2% thereafter.

A FPT enables the unit holder(s) to utilise their individual land tax threshold in determining the land tax applicable. In some instances it is possible to have a “special trust” altered to a FPT to obtain the benefit of the land tax threshold in future years.

In Victoria, if you own land as trustee of a trust you are required to pay land tax at the surcharge rate (subject to various exclusions) if the aggregate Victorian land holdings of the trust is valued at or over $25,000. The surcharge rate is 0.375 per cent above the general land tax rate for land holdings valued between $25,000 and $1.8 million. The surcharge rate tapers away for trusts with aggregate land holdings valued between $1.8 million and $3 million and for land holdings valued at or over $3 million, the surcharge rate is the same as the general land tax rate.  Victoria does not differentiate between the type of trust other than SMSFs.

Queensland has a separate land tax threshold for non-individuals (i.e. SMSFs, trusts and companies). Land tax is assessable for land values in excess of $349,999 at $1,450 + 1.7% per dollar (scaled).

OSR Land Tax audits

Some states are undertaking land assessment audit activities.  With the enhancement of computerisation of land records State Revenue Offices are able to cross match land holdings and ownership changes.  We have experienced a considerable increase in NSW OSR audits in recent times.  Interest penalties may be applied to prior year assessments if land tax payment has not been made.

We encourage all clients to check their land holding values and the appropriate jurisdictions website to check whether they should be registered for land tax.

State Office website addresses:

• NSW:  https://www.osr.nsw.gov.au
• VIC:    https://www.sro.vic.gov.au
• QLD:   https://www.osr.qld.gov.au
• SA:     https://www.revenuesa.sa.gov.au
• WA:    https://www.finance.wa.gov.au
• TAS:   https://www.sro.tas.gov.au/
• ACT:   https://www.revenue.act.gov.au

Clive Nelson is a senior partner at Chan & Naylor Parramatta.