What is land tax and the new 2017 foreign land tax

What is land tax

Most NSW investors will obtain their land tax bill around January - March each year, so this article explains the basics of NSW land tax.

Land tax is a tax levied on the owners of land in New South Wales (NSW) as at midnight on the 31 December of each year irrespective ( does not take in consideration) of your taxable income. Land tax applies to investment properties only, so your owners occupier property is exempt. This is a state tax and is charged by Office of State Revenue.

You will only get a land tax bill if you're over the threshold, see below.

How is land tax calculated

Land tax is calculated on the value of the land only ( not the value of the property), your owners occupier property is exempt, also everyone is entitled to a $549,000 (2017) tax free threshold per person.

**NSW land tax Threshold**
Tax year	Threshold	Tax Rate
2017	$549,000	$100 plus 1.6% for any amount above the $549,000 threshold
	$3,357,000+	$45,028 for the first $3,357,000 and then 2% over that.

Roughly how much is my land worth?

This is hard to tell, as this is land value only excluding the building/location value. Many factors effects the land value such as; location, number of units in the complex, size of your property, land size, proximity to infrastructure and zoning.

The office of state revenue will average the last 3 years land value.

As an example, below gives you a rough idea of the possible land value.

**Sample land tax value**
Location	Property	Market Value	Rough land value
2000- Sydney	1 bedroom unit 50 sq meters Building has >60 units	$750,000	$170,000-$200,000
2150 - Parramatta	2 bedroom unit 90 sq meters Building has >60 units	$750,000	$150,000- $180,000
2500- Wollongong	2 bedroom townhouse 270 sq meters land >15 units in the complex	$550,000	$110,000- $130,000
2121 - Epping	4 bedroom house 700 sq meters land	$2,500,000	$1,100,000- $1,300,000
2145 - Wentworthville	3 bedroom house 550 sq meters land	$900,000	$570,000-$630,000

Example of how land tax is calculated

Mr and Mrs Smith owns 5 investment proeprty with 50% ownership each and one owners occuiper proeprty.

Property A: 1 x bedroom unit in Sydney CBD - land value $190,000

Property B: 2 x bedroom unit in Hurstville - land value $260,000

Property C: 3 x bedroom house in Campbelltown - land value $320,000

Property D: 4 x bedroom house in Stanmore - Land value $850,000 ( OWNERS OCCUIPER)

Property E: 3 x bedroom house in Blacktown - Land value $380,000

Property F: 4 x bedroom house in Blacktown - Land value $400,000

Note: Land tax is charged regardless of the person's taxable income. The land tax is proportioned based on the percentage of ownership.

Total land value (excluding owners occupier property) = 1,550,000

land tax bill per person = 775,000 ( 1,550,000/2)

Minus the 549,000 per person threshold = 226,000

So = $100 + ( 226,000 @1.6%) = $3,716 PER year in land tax. Per person.

Is land tax deductible?

Yes. Click here to learn about negative gearing and what is tax deducitable.

http://www.shapehomeloans.com.au/blog/negative-gearing-2010102420

Is land tax charged for properties under a company and trust?

Yes, in fact depending on your company or trust setup/type; you may not be entitled to any threshold. So this means you may need to pay full land tax from day 1.

Does NSW land value apply to properties located in different state ( QLD, TAS, VIC, NT, WA, SA) ?

No. Each state has their own rule and calculations.

Can I dispute my land value?

Yes, please call the office of state revenue for more details.

http://www.osr.nsw.gov.au/taxes/land

What is the Foreign land tax ( 2017)?

The 2016 NSW budget introduced a surcharge land tax to be paid for foreign person who own residential land in NSW. The surcharge is in addition to any land tax which may be payable.

The surcharge is 0.75% for the 2017 land tax value year. if you are a foreign person, you must pay the surcharge on top of the normal land tax, including your principle place of residence (so no tax free threshold)

A foreign person can be a individual, company or trust.

https://www.claytonutz.com/knowledge/2016/june/new-duty-and-land-tax-surcharges-for-foreign-buyers-of-land-in-australia

Australian resident based overseas ( ex-pat land tax)?

An individual, who is not an Australian citizen is a foreign person if they are not ordinarily resident in Australia

Australian CITIZIEN are NOT foreign persons, no matter where they reside.

** The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. It is important you seek independent financial advice from your financial planner and account.