I bought a Melbourne property in Auction on 1st Dec 2016 and settlement date is 17th Jan 2017. State Revenue Office has confirmed that the vendor should pay the land tax for the year 2017. Because vendor is the owner of the property by 31st Dec 2016 and the land tax is charged for next year in advance as a once off payment. However my solicitor said I need to pay the portion of the land tax from 10th Jan to 31st Dec 2017 as part of the adjustment process before settlement date. It doesn't seem to be fair because this is my Primary Residence and I shouldn't pay land tax. Just wanted to ask opinion from people who experienced similar issue. Thank you very much!
Thanks for your quick responding. TerryW. I didn't agree with anything beforehand. According to my solicitor, land tax has to be adjusted between vendor and purchaser before settlement date based on regulations. I also found the exactly same discussion here http://forums.whirlpool.net.au/archive/2144070 It seems like that the purchaser needs to pay the proportion of the land tax between the settlement date and the end of the year.
Really appreciated your opinion. TerryW. Nothing about Land tax was mentioned specifically in the sales contract. However something like below was in the standard sales contact. 5. Only guidance is Condition 15 of the Standard Contract of Sale, which states: 15. Adjustments 15.1 All periodic outgoings payable by the vendor, and any rent and other income received in respect of the property must be apportioned between the parties on the settlement date and any adjustments paid and received as appropriate. 15.2 The periodic outgoings and rent and other income must be apportioned on the following basis: (a) the vendor is liable for the periodic outgoings and entitled to the rent and other income up to and including the day of settlement; and (b) the land is treated as the only land of which the vendor is owner (as defined in the Land Tax Act 2005); and © the vendor is taken to own the land as a resident Australian beneficial owner; and (d) any personal statutory benefit available to each party is disregarded in calculating apportionment.
If that clause is in your agreement then you have agreed to pay the vendors for the land tax they have already paid for the rest of the year.
That may be true but, as this property is @Healthy Frog's PPOR, then surely they entitled for a refund from the SRO as PPORs are exempt from land tax?
It is important that contracts include land tax clauses specific to each deal. Land tax is forseeable in the contract and or a search and easily calculated and hence parties can contract for it like all other owners disbursements such as strata, water and council rates and arrears of taxes which are also settlement adjustments. Your contract probably contained the default clause. Did you get legal advice prior to signing ? Land tax is "at" midnight 31 December (or 30 June in some locations) and what a owner does before or after is generally of no consequence. So no pro-rata exemptions etc To avoid people buying and being resident 1 night to bypass tax there is a special rule. There is a test for exempt residency that looks back or forward but it wont apply in this instance. To use an example how that works; a) The vendor ceases to occupy on 29th December. Technically not their exempt residence on 31 Dec. But provided they can look back 6 mths its still exempt. b) A new vendor acquires on 29th December. If resident on 31st December then it MAY be exempt provided they can look forward 6 months and meet the requirement Principal place of residence (PPR) exemption | State Revenue Office So lets assume it is imposed and you intend to rent the property out. Is it deductible ? No. It relates to a period when the property was not available for rent (31st December) then it isnt deductible. It is a capital cost that increases the costbase. The exception is the ACT.
