Land tax question (NSW)

Discussion in 'Accounting & Tax' started by Kimmyy, 19th May, 2022.

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  1. Kimmyy

    Kimmyy Member

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    Hello

    I have a principle residence which I have moved out of 3 years ago. It has been rented since and I have been paying land tax for those years.

    I have read on this forum and the legislation that if it is not leased for more than 6months (ie not beyond 30th June), I will not be liable for land tax this year.

    I have calculated that it is cheaper to have the house not leased for the remaining 6 months than to pay the land tax.

    I would like to explore the option of terminating the current tenancy/lease at 30th June then let the tenants live there for free until 1st Jan without a lease contract. Would that satisfy the condition set by RevenueNSW to allow for the land tax exception?

    what are some pitfalls of this?
    I will be consulting with a tax agent but wanted to get views from the experienced members on this forum.

    Thank you!
     
  2. Terry_w

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

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    This is not the case.
     
    Paul@PAS and Scott No Mates like this.
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    And a tax adviser cant address legal issues with leasing and deferral etc
     
  4. thatbum

    thatbum Well-Known Member

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    Apart from the numerous other reasons why this wouldn't work, this arrangement almost certainly would still be a "lease contract".
     
  5. Trainee

    Trainee Well-Known Member

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    Not sure of the significance of 30 jun here. Isnt nsw land tax based on your landholdings on 31 dec?
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    That's only the census date.
     
  7. Kimmyy

    Kimmyy Member

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    Thank you so much for your responses.

    I was referring to the extract from here -

    LT082v5

    Concession for absences from the PPR – clause 8

    During the period of absence by the owner, income may be derived from letting the home under a lease or licence, provided that the period of such letting does not exceed a continuous period of six months or for periods not exceeding a total of 182 days in the calendar year preceding each taxing date. Each overnight stay is counted as one day.

    If the home is let for longer periods, it will become liable for land tax in the following tax year unless the rental income derived is no more than is required to pay the cost of regular outgoings such as council, water and energy rates, and maintenance costs of the owner (excluding the cost of mortgage repayments).



    It seems to imply that I would be exempt if the lease terminated within 182 days in a calendar year. I am currently renting and have lived in the house for 3 years prior to moving out 3 years ago.


     
  8. Kimmyy

    Kimmyy Member

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    Thank you paul.
    Would you know who would be best placed to provide advice here?
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Solicitors give advice on law

    The NSW land tax rule applies a view that considers the ownership in the preceeding 6 months of the taxing date. This is for absence. I assume you may also meet the requirement it WAS your home then you were absent and also meet the other requirements for the 6 months which limits what income can be received and if the continuous period is more then 6 months it can be fatal. Leased property probably will not be acceptable even if the rent isnt paid as it may be a legal entitlement. Of course you must apply for Clause 8 exemption and OSR require relevant proof. Its not automatic. OSR can guide and assist and provide information without charging you of course.

    Since its been rented 3 years... Fail
     
  10. Kimmyy

    Kimmyy Member

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    Ok got it. Thanks.
    I have lodged an enquire with OSR too and awaiting their response.

    I had understood182 days in the taxable year but will get clarification. Thanks for taking the time!
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Perhaps you didnt read the ""or""... It may be a legal arguement concerning reading the Clause and while the Commissioner will have its own (published?) views a legal arguement may fail if you seek to make it with the wrong information and arguement. The words after or and before or apply different tests. There are also other tests surrounding your absence eg where did you reside while absent ?

    The Commissioner generally takes the view that the whole of the absence period must be considered to the test otherwise as it reads every year when a lease commences or ends there may be grounds to exempt. The test period is the period of absence.

    During the period of absence by the owner, income may be derived from letting the home under a lease or licence, provided that the period of such letting does not exceed a continuous period of six months

    Then the second limb is fatal thereafter

    If the home is let for longer periods, it will become liable for land tax in the following tax year unless the rental income derived is no more than is required to pay the cost of regular outgoings such as council, water and energy rates, and maintenance costs of the owner (excluding the cost of mortgage repayments).

    Loads of people try this one and are refused each year thinking the 6 year rule can exempt rented property.
     
  12. Kimmyy

    Kimmyy Member

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    thank you! That has become crystal clear for me. Really appreciate your response.