Complacent NSW landowners at risk of land tax shock

Recently released 2012 NSW land tax rates suggest unwary NSW landowners are at greater risk of becoming taxable for the first time and obliged to lodge registrations by the March 31 deadline.

Paul Anderson, a property law partner with TurksLegal, says this year’s 2.3% uplift in the tax-free threshold followed a six-year period of more modest rises around the 2% mark.

“This means many more landowners may find themselves with the nasty surprise of a land tax liability for the first time in 2012 as a thinning threshold leaves them more exposed.

“In contrast, the threshold rises from 2001 to 2004 were substantially higher, ranging from a low of 6.8% to a high of 21.5%.”

The 2012 tax-free threshold is $396,000 – up $9,000 on the year before and on trend with the low increases since 2006.

It was released last October, with the individual land tax assessments over the past month.

“While this reflects an overall softening in the property market, it’s no longer safe for landowners to assume the threshold will provide a secure buffer,” Anderson says.

“Given the resilience of property values in some parts of NSW, there’s no doubt that some landowners who were previously exempt may suddenly creep into the taxable category.

“First-time land taxpayers who fail to register on time may be subject to penalties and interest so it’s important to understand when their obligations are triggered,” Anderson says.

As a general rule NSW landowners are likely to have to pay land tax on any property they own other than their principal place of residence.

Exemptions also apply for land zoned rural or non-urban, which is primarily used for primary production, and land used primarily for boarding houses and low-cost accommodation within a five-kilometre radius from the Sydney GPO.

New taxpayers must lodge a registration form with the Office of State Revenue (OSR) by March 31, 2012.

The OSR will then issue them with a notice of assessment spelling out land tax liability for the year.

“If they were registered in a previous year, they will automatically receive an assessment between January and March,” Anderson says.

For 2012, the land tax rate is $100 plus 1.6% of the landowner’s total NSW land holdings as at the end of 2011, in excess of the $396,000 threshold.

High-value properties are subject to a higher rate of 2% on the portion of the property’s value exceeding a ‘premium’ threshold of $2,421,000.

“If you disagree with a land tax assessment, you can lodge an objection with the OSR but you will need to act fast and get it in within 60 days,” Anderson says.

“However, if you have no objections you should be aware you have the option of receiving a 1.5% by paying your full tax liability prior to the first instalment date.

“If you’re not sufficiently cashed up to take advantage of the discount, then your fallback is to pay in the usual way, in three instalments on the dates specified in your assessment,” Anderson adds.

TurksLegal is a law firm with offices in Sydney and Melbourne, established in 1981, and currently with 24 partners and over 100 staff.

Yearly increases in NSW land tax-free thresholds