Hello All, Have recently sold a property in NSW and settlement is set to occur late April. I received my land tax assessment in February and I have just paid the full amount that is owing. My question is this (and forgive me if it is a stupid question), is it possible to claim back some of the land tax I paid (which was for the full 2019 year) given that settlement is due to occur in April and I will not hold the property for the full year for which I have paid the tax? Thanks, Hedgy
There's a little box on the contract of sale which allows for a land tax adjustment by the purchaser. Getting agreement is another matter. It is not in the buyer's interest to pay more for something that they'll get no benefit (eg if they're an owner occupier) or only partial tax relief.
No, from the OSR, AFAIK. Yes, from the purchaser IF you had the Land Tax Adjustable boxed checked as Yes on the front page of the contract for sale.
In my most recent purchase, i paid the pro-rata amount of landtax for the part of the year i owned it. This was paid to the seller as part of the settlement. This was based on the fact that I continued renting it out, whereas if the buyer uses it as their PPOR, it might be difficult to convince them to pay their share of land tax.
A buyer shouldnt agree to incur the vendors land tax. The most viable argument is that the owner AT a specific date incurs land tax. eg 31 Dece 2018 in NSW, 31 December in Vic. Unlike strata and rates its not prepaid for a period of time. If they incurred the cost then thats final. Why would you agree to pickup their cost ? There can be exceptions eg developer sales, ACT. A interesting development in the ACT with OTP sales delays has appeared much along these issues and the ACT Govt are proposing to amend the defect in the law which is slugging owners - even for a PPOR that settles late.
Thanks for your responses everyone. The purchaser will be an owner occupier. We did tick the adjust land tax box on the contract, but the purchaser pushed back on that--and I don't blame them. I agreed to cop the land tax. Looks like I'll just use it as a deductible. Thanks again for your responses.
Seems you might be confused--or maybe I am. I wasn't suggesting that the owner occupier could treat the land tax as a deductible. As an owner occupier land tax is not relevant. I was merely suggesting that given I have paid the land tax, I (as the vendor) would use it as a deductible as I have done every year.
Interesting question is would the land tax be deductible in full if part of it relates to the period after your sale. Never considered this before.
But in NSW at least, the land tax is just calculated as at 31 December each year. Either you hold it on that date, or you don't. It's not really apportionable over a year, despite what some vendors try to do.
But land tax is paid in advance, s8 LTMA So if someone is the owner on 31 Dec and then sells the property on 31 Jan they have paid for 12 months worth of Land Tax but only had possession of the property for 1 month or 1/12th of a year. So are they entitled to 100% deduction or 1/12th of the amount paid as a deduction? I would argue 100%, but have never looked into this.
I bought in NSW a few years back, the contract had ticked the box about adjusting land rates but in the body of the contract it specified that land rate adjustment was calculated as if the person owned no other land (this was a standard part of the contract template). Since the value was just under the threshold then no adjustment was to be made, and I specifically confirmed this with my solicitor before signing the contract. Just before settlement there was a disagreement with the vendor (who owned several IPs) wanting a pro-rated adjustment on what he had paid, but my solicitor sorted it out for me and there was no adjustment.
Not quite. Land tax is paid on the land held at 31/12. The assessment notice is issued after that event and paid after the event. A vendor will need to clear that debt prior to transfer. Other than the occupancy PPOR exemption requirements there are no issues concerning land ownership in the period prior or after that specific date. Hence if a buyer incurs land tax under a contract then it is a capital cost even if the buyer intends to rent the premises. For a vendor in the example above the total land tax they pay less the land tax imposed on the buyer as a settlement adjustment would be deductible v's their rental schedule. Or if the vendor did not rent (ie vacant property at 31/12) the net sum may impact the CGT calcs as a third element CGT cost.
