Tax Tip 393: Land Tax PPOR exemption for Property Owned by Children in NSW

A minor child can own property.

The property could even be rented out and/or the main residence CGT exemption allowed.

But NSW laws for land tax are similar to the income tax laws for CGT in that a dependent child will not be allowed a principal place of residence exemption, for land tax, separate to that of their parents. They get one exemption between them all.

Authority
s 12 of Schedule 1A Land Tax Management Act 1956
LAND TAX MANAGEMENT ACT 1956 - SCHEDULE 1A


Example

Bart is 16 years old, and he has a property in his name which he is living in. Homer is Bart’s dad and he as a property in his name and is living in that.

If Bart is dependent on Homer, or the family, then only one of these houses could be counted as the principal place of residence for land tax purposes.

 

One would hope that Bart is independent if he is living away from Homer though.

 

In the old days Bart would have had 2 kids before his 18th birthday, but these days he still needs to ask for money from his parents to pay for food and his iphone.

 

A child and parents are generally entitled to ONE main residence exemption as well. And if the land is adjacent to the parents property BOTH cannot be CGT exempt. As there are different owners it cant meet the adjacent land rule.

 

Here is a related tip

Tax Tip 151: Dependant Children and the Main Residence CGT Exemption Tax Tip 151: Dependant Children and the Main Residence CGT Exemption

 

There is also a issue for cases where the adjacent land is owned by the taxpayer and others. I will use an example

Mum and Dad own a main residence at Point Piper. The neighbouring tennis court becomes available and Dad and his brother buy it and hold it for many years. It will never be available as adjacent land for the main residence CGT exemption. Why ? Beacuse each lot must be sold under a different contract and each has different owners. Hence the main residence exemption can only apply to one CONTRACT being the CGT event trigger. And you get one main residence exemption for each period of time not one per contract. Ironically Dad (but not Mum) may be able to use the exemption if Mum acquires Dads brothers interest immediately prior to the sale so she and Dad are the vendors. The cost of duty must be considered however. Or there could be limited arguments for the brother holding the land on trust etc but that is better a issue to develop early when acquired. A curly one for early legal advice.

This "contract rule" limit is a poorly understood issue for many CGT issues involving adjacent land. Its not unlike the tax issue with subdividing off the rear of your land. Its not considered a part of the main residence.