Advice with NSW Land Tax

[LinnyB]

Hi all,

I wondered if anyone could give me some help on NSW Land Tax.

My husband and I jointly own the home where we live in Sydney. I also have an investment property in NSW in just my name, for which I pay Land Tax each year.

In 2011/2012, we took a year off to go travelling, lived in a caravan, and rented out our house in Sydney, so it therefore became liable for Land Tax for 2012. We declared this, and received and paid a joint bill from the OSR for $5353.30 on the Sydney property (with land valued that year at $724333). That same year I also individually paid $6500 Land Tax on the investment property (with land value $796000).

Today (in March 2014) I received a reassessment of my individual Land Tax for 2012, saying I now have to pay an additional $3405.40, because they have linked the two accounts together. I've looked through the numbers and legislation, and it looks as if this is correct as far as all their calculations go.

However, it seems we are being penalized simply for having our home in joint names. If it were in just my husband's name, the original assessment would apply.

I'm at a bit of a loss to understand it all, as we have always declared all our assets to the OSR, and paid our bills on time. It doesn't seem fair (although I do realise fairness and taxes have little or nothing to do with each other!)

Apart from selling up and moving to New Zealand does anyone have any advice?

Thanks so much
Linny

 

[Scott No Mates]

Have a search of the forums as this question has been asked often.

Here's an example - see post #8 ====> linky

 

[Terry_w]

Hi all,

I wondered if anyone could give me some help on NSW Land Tax.

My husband and I jointly own the home where we live in Sydney. I also have an investment property in NSW in just my name, for which I pay Land Tax each year.

In 2011/2012, we took a year off to go travelling, lived in a caravan, and rented out our house in Sydney, so it therefore became liable for Land Tax for 2012. We declared this, and received and paid a joint bill from the OSR for $5353.30 on the Sydney property (with land valued that year at $724333). That same year I also individually paid $6500 Land Tax on the investment property (with land value $796000).

Today (in March 2014) I received a reassessment of my individual Land Tax for 2012, saying I now have to pay an additional $3405.40, because they have linked the two accounts together. I've looked through the numbers and legislation, and it looks as if this is correct as far as all their calculations go.

However, it seems we are being penalized simply for having our home in joint names. If it were in just my husband's name, the original assessment would apply.

I'm at a bit of a loss to understand it all, as we have always declared all our assets to the OSR, and paid our bills on time. It doesn't seem fair (although I do realise fairness and taxes have little or nothing to do with each other!)

Apart from selling up and moving to New Zealand does anyone have any advice?

Thanks so much
Linny

Thats the law, they way it is. OSR doesn't make the laws but just implents them in relation to duties and land taxes.

I have a client who was caught out and he was able to get an interest free installment plan.

Also consider the tax deductibility side. You can only claim in relation to the year the debt relates to not when it is paid.

 

[Paul@PFI]

The application of a SINGLE threshold is complex but otherwise very simple. All land tax for human owners and fixed unit trusts will always come back to the individuals each taking a share of the value and a share of tax paid by the entities above them (ie joint, trust etc). The process is referred to as a primary assessment and a secondary assessment.

The exceptions are : special trusts, companies and SMSFs who are directly taxed and there is no secondary assessment.

So a person with a property in their own name value $400K and a 50% share of a joint property also with and value of $400K and a fixed trust with $400K of land would find all of the primary assessments would be NIL since the land value is under threshold. However the individual would be taxed on $400K+ $200K + $400K = $1m

 

[Paul@PFI]

TIP : NSW has a special duty exemption which allows a residence owned by one taxpayer to become a joint asset in some circumstances. (Husband / wife) The catch is you can only get exemption when its a residence so the land tax is exempt anyway. But it works when the use is about to change !! Perhaps if you had known this you may have restructured before going away ??

 

[LinnyB]

Thats the law, they way it is. OSR doesn't make the laws but just implents them in relation to duties and land taxes.

I have a client who was caught out and he was able to get an interest free installment plan.

Also consider the tax deductibility side. You can only claim in relation to the year the debt relates to not when it is paid.

Thanks so much all.

Terry, do you mean I will need to try and get a tax deduction for the extra money payable ( ie $3405.40) for the 2012 financial year, not this current one? As our only income that year while travelling was virtually just the rent on the two properties, I don't think we would have paid a lot of tax anyway.

Thank you
Linny

 

[LinnyB]

TIP : NSW has a special duty exemption which allows a residence owned by one taxpayer to become a joint asset in some circumstances. (Husband / wife) The catch is you can only get exemption when its a residence so the land tax is exempt anyway. But it works when the use is about to change !! Perhaps if you had known this you may have restructured before going away ??

I'm never going on holidays again without consulting you Paul!

 

[Paul@PFI]

Thanks so much all.

Terry, do you mean I will need to try and get a tax deduction for the extra money payable ( ie $3405.40) for the 2012 financial year, not this current one? As our only income that year while travelling was virtually just the rent on the two properties, I don't think we would have paid a lot of tax anyway.

Thank you
Linny

Correct - remember time limits apply to amend too. If income was low / nil then a loss could carry forward too. But 2012 would need to be amended to obtain this. If the time limit is exceeded and the deduction isn't claimed its still a CGT adjustment to reduce future CGT !!

 

[Terry_w]

Thanks so much all.

Terry, do you mean I will need to try and get a tax deduction for the extra money payable ( ie $3405.40) for the 2012 financial year, not this current one? As our only income that year while travelling was virtually just the rent on the two properties, I don't think we would have paid a lot of tax anyway.

Thank you
Linny

If the land tax relates to the 2012 you can only claim in it the tax return for the 2012 year, even if you pay it in 2014.

 

[Paul@PFI]

I have always wanted to take ATO on with that view. Not all states use 31 Dec as taxing date. either So a 30 June year might be problematic for this approach.

There are also taxpayers affected by an indirect interest in land (ie a trust) who may not even be a trustee director - How do they determine liability ?

ATO don't allow council rates that are unpaid to be deducted when incurred and its just as capable of being self assessed / estimated. The land tax view assumes that the landowner can assess and determine values.

Interested in other tax professionals views if they think I'm a grump or its a fair view ??

 

[Terry_w]

There are also taxpayers affected by an indirect interest in land (ie a trust) who may not even be a trustee director - How do they determine liability ?

?

Fair few about the claiming of land tax - why shoud land tax be different to other expenses?

As for the above, in NSW trustees are joint and severally liable. I have a dispute now between 2 trustees of a unit trust (not fixed) in NSW where 1 trustee is refusing to pay, so far. Trust was set up by a large top 4 accounting firm and it is a terrible mess.

In QLD unit holders can be liable for land tax where a trustee does not pay - which could be a risk with a corporate trustee with no assets. Imagine what could happen on the break down or a marriage for example.

 

[Paul@PFI]

Fair few about the claiming of land tax - why shoud land tax be different to other expenses?

As for the above, in NSW trustees are joint and severally liable. I have a dispute now between 2 trustees of a unit trust (not fixed) in NSW where 1 trustee is refusing to pay, so far. Trust was set up by a large top 4 accounting firm and it is a terrible mess.

In QLD unit holders can be liable for land tax where a trustee does not pay - which could be a risk with a corporate trustee with no assets. Imagine what could happen on the break down or a marriage for example.

I have an issue with tax debts of a trust where the ATO went gangbusters against one trustee and not the other. Unfortunately it will often come down to who has better assets and paints a better target. Its like the problem with partnerships. If there had been a company trustee the issue would be different. I now wont establish a trust or a SMSF without a company trustee unless there are compelling reasons to use a human trustee