Land tax NSW. buying with existing lease

Hi All. I find myself in a situation where I sold my former PPR in Sept '20 and purchased a new property on 8 Dec '20 also as my PPR but it had an existing lease which expired last month (May '21) so I could move in until now. I still got a tax bill for this year 2021 and cannot get an exemption for having an existing lease which was signed by the former owner in May '20. Apparently the Land tax Act Clause 7 only offers this exemption when you don't sell your current home and buy a new home for PPR purposes with a lease in place. If you are a regular Joe like me and have to sell in order to buy then we are still liable for land tax even with the existing lease in place. I've been going back and forth with Revenue NSW since Feb and they can't explain why it favours someone who can afford to hold both properties and disadvantages the majority of home buyers like me who have to sell to finance the new home. Were talking over $18k! Any thoughts or advice?

 

They don't make the laws and its not their job to explain why. They also have no power to bend the laws.

You could go back and look at the explanatory memorandum for the bill that passed that legislation, but does it really matter why?

You could have factored it into your negotiations at purchase and/or got vacant possession, and/or timed it better.

If you paid $18,000 in land tax the land is likely to be worth around $1.9million by my guess. Just the land component so the purchase price might have been around $2.5mil. It might have been lower if you had other property, but this is what the legislation is designed to do, tax people who are renting out property that is valued more than the tax free threshold.

 

Move in before 31 Dec & seek an exemption for land tax on 2022.

 

Yep I'm in now. It was never for investment purposes.

 

Log into the OSR website & change the property to "exempt".

 

I agree with the purpose of having the law but it doesn't explain why one guy who has the finances to hold both properties for 6 months gets off and the other guy who has to sell then buy pays tax. The property is still rented in both scenarios so who would have more reason to be exempt?

 

It is now for 2022 but the tax is calculated on the 31st Dec so it's still due in full for this year no matter the change in status. And they told me regardless of the status online which is an automated system, they can manually override what it says.

 

Clauses in Schedule 1a are really intended to address unavoidable issues where a sale is delayed so potentially one and even both are taxable. This unwinds that apparent concern. However the inverse of puchasing is really a matter of buyer choice eg caveat emptor. Buyer beware. Your legal advice prior to signing could / should have addressed such issues when you asked "what are the issues associated with buying a tenanted property". Land tax and CGT are just two that spring to mind. You probably also had questions concerning property condition, damage etc as well.

Well not quite, it was initially an investment use as there was a initial tenant. This issue affects land tax and also CGT. Your new main residence will never be 100% CGT exempt.
Land tax laws are written with that use in mind. There is a "intended PPOR" exemption but it has limited application but isnt intended to be a avoidance mechanism for investment use property. Clause 7(2) contains the "no income" rule for that reason.

The land tax may be deductible in the year of assessment liability if it relates to a date (31 December) where a tenant occupied the property (whether paid or not !)

 

the law doesnt require your agreement, or need to be explained.

move on. Get professional advice on other stuff, such as whether your cg exemption is impacted by this and you might need to keep records for third element costs?

 

I have and both a Property Lawyer and my State member agree I should be exempt and my member is taking it up for me.

 

'should' in what sense?

 

In the sense of how they read and interpreted the Act. As you said earlier Revenue didn't write the Act so a bunch of pen pushers won't have the experience of a lawyer or MP to know how to apply it. The officer I spoke to didn't even know half the info I was referring to and I'm just someone who read the Act properly.

 

"satisfy the Commissioner"....Maybe 7(2)c.

The OSR is staffed by lawyers and well qualified and experienced persons with QCs and other counsel on retainer who are specialsts in the area of property laws incl land tax and will make decisions based on law and rulings. All decisions are reviewable decisions on appeal. I wouldnt denigrate public servants so easily.

 

If you think they have misinterpreted the law you can make a written submission challenging it and then initiate court proceedings.

There is little point in ringing up and speaking to the phone staff.

 

oh dear, sounds like it’s time to find a new lawyer who understands land tax and should’ve advised you of the implications of settling a tenanted property after 31 Dec. The tenant stayed in the property until May 2021. It doesn’t matter that you intended to eventually live in it as your PPR. What matters is the use of the property as at 31 Dec and the fact is it was an investment property at that time. You’re gonna have to take this as a lesson learnt and move on unfortunately.

 

Decisons by the Commissioner to disallow a request may progress it to an objection. A decision to refuse a objection makes it a state reviewable decision.
Initial process is through objection
Then NCAT
Objections and reviews

Involving others will just burn time and mean it is not then reviewable as the process MUST be followed that is prescribed by law and if its "out of time" you will lack recourse. Involving a minister (incl State Treasurer) wont gain a day of extra time. Most Ministers will refuse any such correspondence and remind you of the objection process - Often weeks later. Their delay in reply or non response isnt a factor NCAT will consider.