Land tax is an annual tax levied at the end of the calendar year on property you own that is above the land tax threshold.

  • Your liability for each year is based on the value of all land you owned on 31 December in the previous year.
  • If the combined value of your land does not exceed the threshold, no land tax is payable.
  • The land tax threshold does not apply to all owners.
  • Land tax applies regardless of whether income is earned from the land.
  • Your principal place of residence is exempt, and other exemptions and concessions may apply.

You pay land tax on land you own, or jointly own e.g.

  • vacant land, including rural land
  • land where a house, residential unit or flat has been built
  • a holiday home
  • an investment property or properties
  • company title units
  • residential, commercial or industrial units, including car spaces
  • commercial properties, including factories, shops and warehouses
  • land leased from state or local government.

Land tax applies regardless of whether income is earned from the land.

Generally, you do not pay land tax on:

  • your home, known as your principal place of residence
  • your farm, known as primary production land
  • any land you own with total taxable value below the land tax threshold.

How much land tax do you pay?

  1. For those eligible for the land tax threshold, $100 plus 1.6 per cent of land value above the threshold (2022 – $822,000), up to the premium threshold (2022 – $5,026,000).
  2. If you are not eligible to receive the land tax threshold, you will be taxed at a flat rate of 1.6 per cent for amounts up to the premium land tax threshold, then at 2 per cent.

 How land is valued for land tax

  • Every year, the Valuer General determines the value of all land in NSW at 1 July each year.
  • Land value is the unimproved value of your land.
  • The taxable value of each parcel of land is determined on the average value from the current year and the two past years, where applicable.

 

Different types of owners and the land tax threshold, did you know:

Individuals and joint owners

  • You are assessed based on the total land value of all your interests in land, whether you own them as an individual or as a joint owner.
  • The land tax threshold will normally apply

 Companies and organisations

  • A company is assessed in the same way as an individual, unless it is related to another company, they are eligible for the land tax threshold

Trusts

  • A trust may be liable for land tax and/or surcharge land tax.

Family/Discretionary Trusts & Unit Trusts

  • These are categorised as a special trust and they do not receive the land tax threshold.
  • They’re taxed at a flat rate of 1.6 per cent for amounts up to the premium land tax threshold, then at 2 per cent.
  • A special trust is when a trustee, not the beneficiaries, is the only person who meets the definition of an owner for land tax purposes.
  • You must register for land tax if you own a property in a special trust.

SMSF – Superannuation Trusts

  • A superannuation trust receives the land tax threshold.
  • If a superannuation trust isn’t a complying or pooled trust, and isn’t a fixed trust, it’s a special trust.

Testamentary Trusts

  • A trust created by a will receives the land tax threshold.
  • However, a testamentary discretionary trust becomes a special trust two years after the date of the testator’s death, or a further period as approved by the Chief Commissioner of State Revenue.

 

How do you decide on the right ownership structure?

1. There is no simple or right answer to this question.

2. In the end the choice of structure is comprised of many variables and different decisions e.g.:

  • Your personal circumstances i.e. asset protection, business risk or other concerns.
  • Your financial situation i.e. your level of income and for those around you.
  • Your plans for the property or your wealth plan.
  • Which tax you are most concerned about i.e. capital gains, income or land tax.

3. Consideration must be given not only initially but also periodically during the ownership period of the property as things change.

Examples of some of the considerations affecting choices in ownership structure?

  • High income earners often favour a Trust structure.
  • People vulnerable to litigation may favour a Company or a Trust with a corporate trustee.
  • Capital gains outcomes are often better for Individuals and Trusts.
  • Investment and business assets are very different for capital gains tax.
  • How many investment properties do you have or intend to have, once you are over the threshold Land tax is payable, that said there is no threshold for special trusts.
  • What is the long term plan.

Beware: Land Tax requires you to register and many people forget or do not and the liability emerges when you sell a property.

How to register

If you have a trust that holds property and have not been registered for land tax yet, you need to action the below immediately

(1) Complete pre-registration

(2) Once you have completed your pre-registration, the revenue office will

  • contact you within two business days with your client ID and correspondence ID
  • issue a new notice of assessment each year showing your land tax liability.

Read more here: https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/land-tax#taxableland

Please call if you would like to discuss this further.