Do I need to pay land tax if I settle in December?

Discussion in 'Accounting & Tax' started by kirags, 5th Nov, 2019.

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  1. kirags

    kirags Active Member

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    I am negotiating a settlement in a new property which will be our PPOR and most likely I will settle and move in sometime in December. This means our current PPOR will become an investment and be subject to Land TAX.

    My question is, would I need to pay land tax on the property that becomes an investment say on the 15 of December although we have had this property as PPOR for many years?
    It is possible we may not even have tenants until January.

    Another possible scenario is that we dont move to the new house until January, therefore would land tax be applicable in the new house?
    I guess the rule of " based on the situation on 31Dec" is what is confusing me.
    I could ask for settlement after 1January to make things simpler if needed however most solicitors would be on holidays until mid-January so this may not be acceptable for the vendor.

    Thanks for the advice
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No state mentioned, no mention level of holdings, ownership structure.
    Impossible to say, but the land might be under the threshold anyway
     
  3. kirags

    kirags Active Member

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    Oh Sorry, properties are in NSW, join ownership.
    The land value of the current property is $978K which passes the threshold and based on my calculations would mean a land tax bill of around 5K. The new property is in the same suburb but has extra 100m2 so I would imagine the value to be higher (we haven't purchased yet so not sure how much).
    We only own this current PPOR which will turn into investment and the new property which will be the new PPOR.
     
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes. One will be taxable. And you may not be able to choose.

    Can you negotiate with vendor for delayed settlement that doesnt have a land tax liability (their own home ?) and also defer your move out of the existing house a week? eg You offer them eg 2K for a deferred settlement in early January. It wont appeal to them if its taxable to them of course.
     
  5. kirags

    kirags Active Member

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    U
    Thank you for your reply. Unfortunately, their property is an investment so I imagine they would be liable for the tax.
     
  6. kirags

    kirags Active Member

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  7. Trainee

    Trainee Well-Known Member

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    How does joint ownership work here? Total land value is 978k. So each owner is assessed on 489k (if 50/50)? Threshold being 692k.
     
  8. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The landowner is a joint assessment. Unimproved land value - threshold = taxable x 1.6% + $100
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No. Both assessed as if one owner
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Look at the 6 month overlap rule in clause 7 of Schedule 1A of the land tax management act
    LAND TAX MANAGEMENT ACT 1956 - SCHEDULE 1A
     
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  11. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    In practice they will require an application for this concession and seek a bit of information to verify the facts. Settlement info, evidence of the date you did move etc. Services connections etc I have seen some taxpayers struggle to evidence this if they self move v's say a removalist, truck hire etc.

    Clause 7 is also good for a delayed settlement where the buyer acquires the new home but the expected sale of the former home is delayed over Christmas New Year. The OSR accept as one concession that the interest etc on the delayed settlement will in itself be partial evidence of the special circumstance resulting a potential land tax issue.
     
  12. solly155

    solly155 Member

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    I’m in a similar situation with myself being the owner only.. I’m moving into the property right away, but how can I prove that I actually moved in?
    I don’t need to hire a removalist as I have my own Ute and plenty of mates to help!!
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Stat dec
    Photos
    Electricity connection
    Gas
    Drivers licence
    Letters
    Etc
     
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  14. solly155

    solly155 Member

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    Thanks
     
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