Land Tax is even more tricky in 2024

Land Tax is even more tricky in 2024

Would you believe that, from the start of this year, the NSW Government are taxing many properties a sum of money that is greater than the rental, or potential rental, achievable from the property! Many thousands of people are blissfully unaware of this.

NSW State Government Land Tax is payable if the total land value of the property that you own in NSW on the last day of the year exceeds a land tax threshold (excepting your principal place of residence).  Whether or not you will have a land tax liability depends on the actual land value, the land tax thresholds and whether you are designated as a foreign owner. There is a general threshold and a premium threshold.  The general threshold for NSW in 2024 is $1,075,000 and the tax rate is 1.6% of the land value.

Land value is the value of the land, ignoring the value of the building(s) and structures on the land. In the case of a unit, land value is the value of the land upon which the building has been erected. The value is then apportioned among the units in the strata scheme using the unit entitlement. You can ascertain your land value using an online tool NSW Valuer General LVO or find the land value on the latest council rates notice.

If you fail to register for land tax, it is highly likely that, at some point, this will be discovered by Revenue NSW. They will then invoice you for all the unpaid land tax (which may be over several years) and usually add interest together with penalties.

Now there is a vastly higher land tax amount if you are deemed to be a foreign owner:

  • You are not an Australian citizen, or
  • You have not lived in Australia for 200 days or more in the 12 months prior to 31 December and, you are not a permanent resident, or
  • You are not a citizen of New Zealand, South Africa, Germany, Finland, Japan, Norway, Switzerland or India.

Many landlords are foreign owners and they will now discover that their Land Tax liability exceeds the income from the property.  Land Tax Calculator

Example 1:  Wollstonecraft 2-bedroom unit, 2 bathroom, lock-up garage, $660pw.

Land Value:    $549,947

Tax Calculation: Threshold does not apply, rate of 4.0% (the 2023 rate was 2.0%)

Tax Payable: $21,998.00       Gross Annual Rent:  $34,414

Net Rent is approximately $7,000 after accounting for Strata, Council, Water, Agent, Insurance, Repairs etc

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Example 2:  Crows Nest 2×2-bedroom duplex house, 3 cars, unrenovated, 2x$520pw.

Land Value:    $1,040,000 x 2 = $2,080,000

Tax Calculation: Threshold does apply, rate of 4.0% (the 2023 rate was 2.0%) plus 1.6% of amount above the threshold.

Tax Payable: $83,200 + $16,180 =$99,380.00       Gross Annual Rent:  $54,229

Net Annual Loss is significantly in excess of $50,000 after Council, Water, Agent, Insurance, Repairs.

In my opinion, it is not easy for a person to know when they are required to pay land tax.  The obligation is on the landowner to discover this and ignorance is not a defence. You must register for land tax if you are a foreign owner or if the value of all your taxable land is above the land tax threshold, even if you haven’t received a notice of assessment. To register, you will need a client ID and correspondence ID.

Marriott Lane is usually not aware of all the land that our clients own or their citizenship, so we cannot be sure of any obligation to pay Land Tax.  We hope their accountants are on top of this. Occasionally, Revenue NSW will contact us and ask for confirmation about the ownership of a property we are managing.  We do process the payment of land tax obligations for many of our owners from the rent we receive on their behalf.

Vast numbers of landlords live in the UK, USA, Canada, Singapore, Hong Kong & China. Some are Australian citizens and some are not.  It appears the NSW Government is using Land Tax as a mechanism to persuade foreign owners to sell their properties. So much for Australia being regarded as a safe haven for foreign real estate owners.

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