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Tax Tip 8: Forgotten land Tax

Discussion in 'Accounting & Tax' started by Terry_w, 1st Aug, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Forgotten land Tax


    I have met some people who have forgotten to claim land tax and/or thought they were exempt but were caught out. Land tax can only be claimed in the year in which it relates to - not the year in which it was paid. ATO ID 2010/192 (now withdrawn, but law still current).


    In some cases it will be too late to amend tax returns and these land tax costs will not be able to be claimed for prior years.


    I had a call from an old friend who has a trust which owns 3 rental properties in NSW and has held them for about 10 years - yet they have never paid land tax and didn’t really know about it until I asked him how much he was paying.


    The problem is when the property is sold the land tax clearance certificate will not be clear and he will have a large sum payable before settlement. Yet they will probably not be able to claim more than 2 years. As the trustee is liable this will also affect the distributions the trust has made and it will be messy to fix so there would be additional tax agent fees.

    So if you haven't already register for land tax and pay it as it is incurred.
     
  2. SeafordSunshine

    SeafordSunshine Well-Known Member

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    'So if you haven't already register for land tax and pay it as it is incurred.'
    Dear Terry,
    could you clarify what this means please?
    Thx
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  4. thesuperman

    thesuperman Well-Known Member

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    How would it be possible for the friend to have a trust and never have paid tax? Doesn't the land tax section of the government send a yearly land tax statement to owners (trust) saying the value of the land component & if any land tax is due?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes it is possible - trust could be running at a loss. No land tax in some situations.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Way too common. Land tax clearance certificate is required when you sell land. But the arrears can only be claimed at a specific time. The penalty is not even deductible.
     
  7. thesuperman

    thesuperman Well-Known Member

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    Wondering if maybe that friend was owning the property in a trust with personal names as a trustee rather than a company? Therefore the land tax office thought the property was owned in personal names therefore no land tax payable.

    If selling the property, wouldn't the land tax clearance certificate then show that the friend had no land tax outstanding in that case? Or the sales contract would say John Smith ATF Smith Family Trust & that could've caught them out?
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Land tax registration fraud perhaps ? Land tax assessments are issued to those who register. So to achieve your intent you need to fraudulently complete a registration for a human owner. Very nieve approach ? Buy soap on a rope is my tip.

    State Govts and Commonwealth share tax data and under the GST agreements and share land records too for GSTand CGT and income tax..So it follows the OSR data match to ATO records you realise....Dont you ? Sorry your stupid friend. I must get three enquiries a year to assist the penalties on this issue. Dont call me. Waste of time.
     
  9. James Hill

    James Hill Active Member

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    If you never registered and then get a huge landtax bill at the time of sale, can you add the whole amount to the cost base to decrease your CGT?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes
     
  11. Redwing

    Redwing Well-Known Member

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    You have to register for land tax?
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sorry I should have said "in some states". In NSW yes.
     
  13. S.T

    S.T Well-Known Member

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    In Victoria, make sure you notify the SRO if one of your properties is missing from Land Tax bill sooner, rather than later. Had it happen with my old PPOR I rented out, so I just mailed the SRO advising of my new PPOR address and what date my old PPOR became an IP.
     
  14. Redwing

    Redwing Well-Known Member

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    Don't stress an old fella out Terry :D
     
  15. sammmeee

    sammmeee Well-Known Member

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    So, in WA if I haven't received a land tax bill, Im in the clear??
    I cant understand how we haven't received it. On our rates it gives a rental amount but not a land valuation.. or does it? Any WA people have an answer?

    Our ownership differs from house to house maybe that's why we haven't received the dreaded bill??