NSW Land Tax, made a foolish mistake renting out property

Discussion in 'Accounting & Tax' started by filipe, 14th Oct, 2019.

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  1. filipe

    filipe Well-Known Member

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    Location:
    Sydney
    I bought a house, in my name only, with a land value of $1m in Syd/nsw.

    I rented it out as soon as I bought it, for 12 months. From Feb 2018 to Feb 2019.

    I later realised that the "test" for land tax in NSW is what the property is doing as at 31 December, in my case 31/12/2018 = Rented as IP.

    Unfortunately I had done a 12 mth lease and served notice to the tenants to vacate 4 weeks after this date, in beginning of Feb 2019, so I could move into the property myself. That extra 4 weeks rental income got me ~$4k; but now as a result I am hit with a land tax bill of ~$8k. Kicking myself as to not getting the tenants to move out early as they would've been keen because they split up. :'(

    I just lodged my tax and declared the rent income/prop being investment for 30 weeks, which I assume is what triggered OSR to issue me a letter saying to confirm if I have any exemptions.

    Can anyone see any exemption which may apply? I did not own any other property, had bought this one and 2 weeks after settlement rented it straight out. So no 6 mths living there.

    The only thing I can see is the commissioner has discretion under Schedule 1A, clause 2(2)(b) but it sounds like it is a long stretch.

    There is a vacant block of land (my property is two title), but this was also rented out on the lease to the tenant as a car park, so I imagine I also can't claim unoccupied land PPOR.

    Am I fresh out of luck, cop it on the chin and chalk this up to experience? I'm not seeing any exemptions jumping out at me because it was a 12 mth lease, beyond 31/12/18 and I rented property straight out rather than living in it for 6 months....
     
  2. Terry_w

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

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    Yes it happens a lot. One of my clients gave tenants notice to move out in Jan and it cost her about $10k too.
    Generally the property needs to be the PPOR from 1 July to meet the 31 Dec deadline, or with the commissioners discretion to waive this. I can't imagine he would waive it where it was tenanted at that date, but worth asking for a private ruling
     
  3. filipe

    filipe Well-Known Member

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    thanks for the input Terry_w, any ideas how I would justify / reason for asking for discretion to waive it? I imagine ignorance of the tax rules and even financial hardship are not really reasons to warrant having a land tax bill waived, any suggestions on which approach to take? :)
     
  4. Terry_w

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

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    the lease expiry date would be relevant
     
  5. Paul@PAS

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

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    OSR concessions for (vacant) land intended as a PPOR and that for a former leased property not quite meeting the 6 months tends to be successful. However a lease for 12 months wont normally be successful. I have seen people more successful where they meet 5 and just less than 6 months of the 6 month test and a intention to maintain that residence after this point. The act of residing needs to be evident.