The 2005 Land Tax year has seen in effect, the significant changes to the administration of Land Tax in New South Wales introduced by the State budget earlier this year. Many of you may have already received assessments.
Abolition of threshold
From 1 January 2005, the land tax threshold (currently $317,500) will be abolished and the tax rate of 1.7% replaced by the scale set out at below.
|
Land Value |
Rate | |
|
Less than $400,000 |
0.4% | |
|
$400,000 to $500,000 |
$1,600 plus 0.6% of the value over $400,000 | |
|
over $500,000 |
$2,200 plus 1.4% of the value over $500,000 |
Property with a land value of $25,000 or less will be exempt. If the land is the subject of a special trust (such as a discretionary trust) or is owned by a company classified as a non-concessional company, land tax will be charged at a flat rate of 1.4% of the taxable value of the land.
Exemptions
The main exemption is for land which is used as the principal place of residence of the taxpayer. Where the principal place of residence is used for other purposes as well as being the principal place of residence (e.g. a shop, boarding kennels, professional practice) that proportion not used as the residence of the owner will be liable for tax.
Abolition of Premium Property Tax
Previously an owner whose principal place of residence had a land value that exceeded $1,970,000 was liable to pay land tax at the rate of 1.7% of that part of the land value of land which exceeded $1,970,000. From 1 January 2005, this will be abolished and there will be no land tax payable on any property used wholly as the principal place of residence of an individual.
Tax Deferral
An owner may defer land tax on one or more non-income earning property if the following conditions are met:
- the aggregate land value of the owner’s properties (other than his principal place of residence) is $400,000 or less;
- the owner receives no income from the property (ies);
- the owner’s income does not exceed the income tax free threshold for a single pensioner (currently $33,670).
Interest on the deferred tax will be calculated for each year that the tax is deferred at the CPI rate for the previous year. The deferred tax must be paid on the sale of the land or on the death of the owner.
Concession for mixed use land
This concession was formerly available for flats but will, from 1 January 2005 be available in relation to both mixed developments and mixed use land.
Mixed use land is land which is used partly for residential and partly for other purposes such as where residences are in the same building as professional practices or shopfronts. Mixed development land is defined in the valuation of Land Act as a parcel occupied or used solely as the site of one or more buildings comprising one or more flats and one or more offices.
Jennifer is a property lawyer with expertise in all areas of conveyancing including the sale, purchase and mortgaging of both residential and commercial properties.
For further information, please contact Jennifer Graves.