How you could end up paying someone else's land tax bill
GUEST OBSERVATION
I recently had a friend who went to auction, underprepared, and who had neglected to thoroughly review the contract prior.
She was a little under the pump, given her partner had only seen the house 30 minutes prior to the auction commencing. Meanwhile her solicitor/friend was doing her a favour trying to review the contract copy over his iPhone, in a rushed five minute window over a family lunch.
Needless to say, the environment wasn’t exactly conducive to a trouble-free sale and a few items were overlooked in the lack of due diligence, one of them being a land tax adjustment for a whopping $7,000!
This insidious tax that most investors overlook in their haste to rack up their property portfolio can creep up quickly, adding significantly to your costs as a land owner. This tax differs from state to state here in Australia. What some home buyers fail to realise is that you can also be up for the previous owner’s land tax costs if you aren’t careful, even if you are purchasing the home as a principal place of residence (PPOR).
On the NSW sales contract, if the 'yes' box is marked on the front page next to the checkbox that asks “Is land tax adjustable?”, be aware that you may be up for unwanted land tax costs. You will have to reimburse the vendor for land tax based on the proportion of the year you each own the property.
For more information on land tax and ramifications here visit the NSW Office of State Revenue website and for other states, also ensure you read the fine print on contracts.
Otherwise, as with my friend, you may well find yourself paying the price for lack of knowledge and preparation.
Jacque Parker is director of House Search Australia and the president of the Real Estate Buyers Agents Association of Australia (REBAA).