On Tuesday 31 July 2018 the Keystone Property Division attended the 2018 State Revenue Update which provided an update on areas involving Land Tax, Surcharge Duty, and First Home Benefits.
It is important when Selling or Purchasing property in NSW, that you are aware of your requirements with regard to state Taxes and Duties, and that you are also aware of any exemptions or concessions.
Land Tax is charged annually on property owned as at midnight 31 December of each year. If you own land on this date, and if you are liable to pay land tax, the collective value determines your liability for the next year. For Australian Citizens and Permanent Australian Residents, land tax is not payable on their principal place of residence.
Land tax may be payable by anyone who owns land in NSW. This includes a natural person, company or a trust.
Keep in mind, if you own land at midnight on 31 December 2018, and decide to sell your property in January 2019, your land tax for that property is still payable in 2019. There is no pro rata or apportionment for land tax for the property should you decide to sell.
Land subject to Land Tax
- Residential, commercial or industrial properties, including car spaces, factories, shops and warehouses;
- Vacant land, including vacant rural land;
- Investment properties or holiday homes;
- Company title units; and
- Land leased from state or local government.
Land Tax is generally charged on the average value of land and is determined by the Valuer General as at 1 July each year.
There are land tax thresholds and a scale of rates that apply. There are a number of exemptions and concessions available to land owners, which a taxpayer must apply for, usually each year. Click the following links below to find out more about thresholds, rates and exemptions to see whether you are liable to pay land tax for the property’s you own:
Thresholds and Rates – https://www.revenue.nsw.gov.au/taxes/land/rate
Exemptions and Concessions – https://www.revenue.nsw.gov.au/taxes/land/exemptions
In addition to Land Tax, Foreign persons who own residential land in NSW must pay a surcharge land tax of 2%. It is important to be aware that the surcharge land tax is payable, in addition to any land tax payable on the property. Surcharge land tax applies to the portion owned by the foreign person.
A land owner deemed to be a Foreign Person (as defined in Revenue Ruling G 009) must pay Land Tax on their principal place of residence, as well as investment properties. There is no land tax threshold for foreign property owners, meaning land tax is payable for land worth $1 and over.
To find out more information about surcharge land tax, please click on the following link – https://www.revenue.nsw.gov.au/taxes/lts
Surcharge Purchaser Duty is a surcharge which is payable by a Foreign person acquiring residential land in NSW. The surcharge purchaser duty is calculated at 8%, and is in addition to the duty (formerly known as Stamp Duty) payable on the purchase of residential property, on the relevant portion acquired by the foreign person.
If a transaction is exempt from duty, then they are generally exempt from surcharge purchaser duty. More information can be found at https://www.revenue.nsw.gov.au/taxes/spd
It is important to be aware of what ‘Foreign person’ is defined as. In accordance with Revenue Ruling G009, a foreign person is a person who is not an Australia Citizen or who is not ordinarily resident in Australia. Australian Citizens are not deemed foreign, wherever they are located in the world.
A foreign person also includes corporations, trusts and foreign governments.
First home benefits
First Home buyers may receive the First Home Buyers Assistance Scheme when purchasing new or existing homes, or vacant residential land.
This is an exemption from duty for a new and existing home valued up to $650,000.00. If you purchase a property valued between $650,001.00 and $800,000.00 you will receive a concession on duty on a sliding scale.
An exemption exists for vacant land on which you intent to build your first home and this applies to land valued up to $350,000.00, whilst there is a concession available for vacant land valued between $350,001 and $450,000.00.
There is a currently a First Home Owner Grant (for new homes) scheme where a $10,000.00 Grant is provided and is limited to new homes worth up to $600,000.00 for contracts to purchase a new home (includes off the plan and substantially renovated homes).
A new home is defined as ‘a home that has not been previously occupied or sold as a place of residence, and includes a substantially renovated home and a home built to replace demolished premises’. To be eligible you must meet the requirements which can be found on the by clicking the following link – https://www.revenue.nsw.gov.au/grants/fhog
In addition to the eligibility criteria, first home buyers must also meet the mandatory residence requirements. You are to reside at the home as your principal place of residence for a continuous period of at least six months, commencing within 12 months from completion. (principal place of residence is the home that you primarily reside in).