NSW land tax calculation on joint ownership

I've been given mixed opinions from two accountants on this but after reading the NSW OSR website I think this is correct:

- A and B own property (50/50) with land value of $1,200,000
- A and C own property (50/50) with land value of $200,000

So the Joint owners are assessed as Primary tax payers. In this case, only A and B pay land tax. Amount = (1,200,000-560,000)X0.016 + 100 = $10,340

Each joint owner is then assessed as a secondary tax payer who is then entitled to a deduction. So just for owner A:
- A's individual assessment: (600,000 + 100,000 - 560,000) X 0.016 + 100 = $2340

However, A is entitled to a deduction which is the lesser of the following 2 calculations:
1)(700,000 divided by 1,400,000) multiply by 10,340 = $5170
2)(700,000 divided by 7,00000) multiply by 2340 = 2340

SO THEREFORE A DOES NOT NEED TO PAY ANY LAND TAX??

Is this correct??

thanks

 

no

 

Terry just wondering where have I gone wrong?
The final land being $10,340 which is payable by A and B as a result of the primary land tax assessment calculation. And in the secondary assessment, A does not need to pay any further tax due to the deduction?

Thanks

 

A and B own a property with land value over the threshold.

 

A's total holdings exceed the threshold.

 

Although isnt that taken into consideration in primary calculation? Given A and B own $1,200,000 in land value, the land tax using the primary calculation is $1,200,000 minus $560,000 multiplied by 0.016 and then plus $100 which gives $10,340. So A and B are responsible for paying for this.

But other than that, A would not need to pay any further land tax?

 

A would pay land tax on the other property & all subsequent properties as their landholding exceeds the threshold.

 

Have a look at one of the old threads we discussed all this in NSW with examples, even those in the know can get it wrong.

in NSW owners of a property are all one buyer with one threshold, if you have holding with others your share will be added on and there is allowances for double taxation prevention.

 

Ive had a look through the previous threads but could not find an example where there are three people involved with two properties. For the example given in the beginning, what should the land tax be?

Example: 50/50 ownership
A + B own property with land value $1,200,000
A + C own property with land value $200,000

Thanks

 

Linky 1 is an example of dual ownership. Your person C doesn't change the way the tax is calculated for A.

 

The OP has overlooked secondary assessments. Taxpayer A has individual interests that exceed the threshold. A would receive a secondary assessment to claw back some of the duplicated threshold from the two interests.

 

Paul what would the secondary assessment and deductions look like?

I just spoke to the osr and they said that there will be no secondary assessment as A does not own any property solely. A owns property with B and A owns property with C but does not own any individually so therefore only primary assessment is needed. Does that sound correct?

Scott: the link you gave was for joint ownership and individual ownership, not for two different joint ownership of property

 

see s27(2) LTM Act
(2) Joint owners (except those of them whose interests are exempt from taxation under this Act) are to be jointly assessed and liable in respect of the aggregate value of their proportionate interests in the land as if the land were owned by one person, without regard to their respective interests therein and without taking into account any land owned by any one of them in severalty or as joint owner with any other person (but by excluding the proportionate value of the interest of any joint owner so exempt).

and then ss (3):
(3) Each joint owner of land shall in addition be separately assessed and liable in respect of: (a) his or her individual interest in the land (as if he or she were the owner of a part of the land in proportion to his or her interest), together with (b) any other land owned by him or her in severalty, and (c) his or her individual interests in any other land.

Then look at s 33:
33 Deductions to prevent double taxation
person is deemed to be the secondary taxpayer in respect of any land or interest, and (b) it is provided that there shall be deducted from the land tax payable by the secondary taxpayer, in respect of the land or interest, such amount (if any) as is necessary to prevent double taxation, the amount of the deduction (if any) shall be the lesser of the following amounts: (i) the amount of land tax payable in respect of the land or interest by the secondary taxpayer, or (ii) the amount of land tax (if any) payable in respect of the land or interest by the primary taxpayer aggregated with the amount of land tax (if any) payable in respect of the land or interest by a precedent secondary taxpayer (if any): Provided that the secondary taxpayer shall be assessed and liable in respect of the land or interest, notwithstanding that the primary taxpayer is exempt from taxation in respect of the land or interest, or that there is no primary taxpayer in respect of the land or interest.

 

Deduction to Prevent Double Taxation | Office of State Revenue

Explains it all. Craig note especially...... Each joint owner is called a ‘secondary taxpayer’ and will be assessed separately for their interest in the jointly owned property together with any other land holdings. The other land holdings can be held either as a single holding or as an interest in land owned by another joint ownership

So no double dip on thresholds. The OSR link provides a calculation example of how secondaries work and the credit given

 

Not correct. See above post

 

Thanks for the references

I think it is starting to make a bit more sense now... will need to sit down to draw it all out though

Cheers
Craig

 

Land tax for entity 1 (A+B) = ($1,200,000 - $560,000) x 1.6% = $640,000 x 1.6% = $10240
Land tax for entity 2 (A+C) = $0
Land tax for entity 3 (A) = ($600,000 + $100,000 -$560,000) x 1.6% = $140,000 x 1.6% = $2240

$600,000 is taxed twice
$600,000 in A+B assessment is taxed at $10240 x 50% = $5120
$600,000 in A assessment is taxed at $2240 x 6/7 = $1920
The lessor value is $1920, so government will give you $1920 as reduction

So A's land tax liability is $5120 + $2240 - $1920 = $5440

 

I have a more complicated property ownership that looks something like this :-
- A, B and C own property (equal thirds ownership) with land value of $2,400,000
- A and B own property (50/50) with land value of $60,000
- A owns 3 other properties individually with a land value of $100,000

Threshold for 2021 is $755,000.

I am not 100% sure how to do this calculation. I think from htopg's post directly above, most of it makes sense. But I am not sure how I handle the fact that A & B has joint ownership in 2 properties, and depending on how I handle it, the "deduction" can be a different value.

Now for what I assume is the straight forward bits :-

Joint owner assessments :-
Land tax for entity 1 (A+B+C) = ($2,400,000 - $755,000) x 1.6% + $100 = $26,420 (or $8807 each)
Land tax for entity 2 (A+B) = $0

Individual owner assessments
Land tax for entity 3 (A) = ($800,000 + $30,000 + $100,000 - $755,000) x 1.6% + $100 = $2900
Land tax for entity 4 (B) = ($800,000 + $30,000 - $755,000) x 1.6% + $100 = $1300
Land tax for entity 5 (C) - Assume we don't have to worry about this as their deduction cancels out the individual component, so they only have to pay $8807 for the shared property.

Where I am not sure, is the deduction calculation. I have 2 Options. First Option 1. Lets focus on owner B, who has no individual property, but is joint owner in 2 properties. In total, do they pay just the $8807 for the 1st joint property, because the deductions from the for the individual assessments cancels the tax from the individual assessment out? The reasoning for this is because the deduction calculation from the NSW revenue website shows the deduction calculation as "joint ownership / total land value of individual * tax on individual". Because for B, all property is jointly owned, the deduction is $830,000 / 830,000 * $1300 = $1300 which completely seems to cancel out the individual component for B. However, I have my doubts this can be correct. If it is, it means A and B can continue to buy land together, and as long as each individual property is below the threshold, B would never pay any more land tax above the originally land tax from the (A+B+C) property. I assume the NSW gov would be very unhappy about this???

I am guessing the real answer clue might be in htopg's post above. Which brings me to my Option 2. For B, maybe the joint ownership of the $60,000 property with A + B own does not count in the "joint ownership" part of the numerator in the equation above for some reason (maybe because there is no tax on that property, because it is below the threshold??). If this is the case, the calculation becomes $800,000 / $830,000 * 1300 = $1253 deduction. And then the Individual assessment if $47 got component.

Anyway, I would be interested to know from someone with better skills than me which of these options is correct (if in fact either of them are). And if so why?

By my calculation under option 1, I have each party paying a total land tax bill as follows :-
A - $9118
B - $8807
C - $8807

Under option 2, my calculation is as follows :-
A - $9212
B - $8854
C - $8807

Anyway, if someone can do the correct calculation, that would give me an idea of what is correct.

Matthew

 

it would take too much effort to work out. If it is already owned like that you can't change it so you will see when you get your land tax assessment.

 

This is a area of personal advice and I cant imagine anyone will be qualified and experienced and provide it as a free community service.

If Mary and Joe own two properties - One 50% TIC each and the other 1% and 99% they will receive ONE joint assessment that disregards the % and then personally may have a secondary assessment that does consider it. The share of credit from the primary assessmnet will vary to equalise the issue but its not 100% foolproof.