Land "surprise" tax, moving in helps or not?

[igzem]

I own two investment properties in NSW East, two units. Rough calculation shows that I might be eligible to land tax, however never received any notice.
Looks like this tax designed as a surprise one. If I move into one of my properties before I sell, will it minimize my tax? And how large is the penalty?
Anyone else came across the "surprise tax" and had consequences?
THANKS!

 

[Terry_w]

I own two investment properties in NSW East, two units. Rough calculation shows that I might be eligible to land tax, however never received any notice.
Looks like this tax designed as a surprise one. If I move into one of my properties before I sell, will it minimize my tax? And how large is the penalty?
Anyone else came across the "surprise tax" and had consequences?
THANKS!

You must register for land tax. Moving in won't help for previous years but may help for the future, depending on when you move in.

 

[Scott No Mates]

Land tax is your gift from the people of NSW.

 

[Paul@PFI]

Land Tax is a state tax that applies to ALL land. Some land is exempt (ie one family PPOR). Land Tax is generally based on the unimproved value of the land.

Like all forms of taxation the owner should be aware of the imposition of tax. The decision to acquire would have been an ideal time to learn that council rates, water rates, DA fees, stamp duty etc all apply in some respects. These are all forms of tax. Land tax is another.

Land tax is a first charge on all property. When selling property the a land tax clearance certificate must be obtained. This process is one involving solicitors and conveyancers generally when the contract is drawn up for the REA to offer the property. The clearance certificate process is intended to identify those who wilfully or negligently omitted paying tax. The OSR debt would be paid on settlement in such cases.

I recommend all landowners register at the time they acquire a property unless it is their home. If they move from their home they also register at that time. This avoid forgetting. Thereafter you wont hear from OSR until or if the property value passes the threshold/s and is taxable.

Registration is important. Its easy to pass the threshold by owning even small interests eg : one house + a share of a unit. They all add up. Quickly in this rising market.

The OSR conduct extensive audit activities to identify those unregistered. Being unregistered doesn't mean you will pay tax.

 

[igzem]

"Surprise" land tax

Thanks all very much. Looks like need to register. The only pleasure is that now I am eligible for the tax designed for the rich. Which I am not...

 

[Hooray]

Actually, rich people with multi-million PPORs don't have to pay land tax.

 

[igzem]

"Surprise" land tax

Probably the main driver to pay this tax is if you are planning to sell. Otherwise can leave to kids to worry
Does everyone pay this tax who is eligible? When I was registering lady on the other end sounded a bit surprised...

 

[Hooray]

Probably the main driver to pay this tax is if you are planning to sell. Otherwise can leave to kids to worry

No, the main driver to pay this tax is because it's illegal not to.

 

[Scott No Mates]

No. If you don't like your kids you can claim hardship and defer the liability. The land tax owed plus interest will be a charge over the land.

 

[cadence]

I own two investment properties in NSW East, two units. Rough calculation shows that I might be eligible to land tax, however never received any notice.
Looks like this tax designed as a surprise one. If I move into one of my properties before I sell, will it minimize my tax? And how large is the penalty?
Anyone else came across the "surprise tax" and had consequences?
THANKS!

This happened to me

Never registered as it really did not occur to me that I would be over the threshold. Received a notice late last year from osr which showed I've been over for 4 years. I was given the calc for each year and issued with a notice to pay. So yes if you don't register there is a risk you will be hit with a bigger bill at a later stage.

 

[Terry_w]

This happened to me

Never registered as it really did not occur to me that I would be over the threshold. Received a notice late last year from osr which showed I've been over for 4 years. I was given the calc for each year and issued with a notice to pay. So yes if you don't register there is a risk you will be hit with a bigger bill at a later stage.

Did you know that land tax is only claimable in the year it is incurred and not in the year it is paid. So you would have to go back and amend previous years tax returns - but you can only amend, generally, the last 2 years.

 

[igzem]

This happened to me

Never registered as it really did not occur to me that I would be over the threshold. Received a notice late last year from osr which showed I've been over for 4 years. I was given the calc for each year and issued with a notice to pay. So yes if you don't register there is a risk you will be hit with a bigger bill at a later stage.

Thanks Cadence. Same here, I expect to receive for 4 years. Were you hit with penalty and interest?

 

[igzem]

Did you know that land tax is only claimable in the year it is incurred and not in the year it is paid. So you would have to go back and amend previous years tax returns - but you can only amend, generally, the last 2 years.

Thanks Terry,
My accountant was somewhat optimistic that we can claim this year when I am going to pay (owing for 4 years). Will share your input with them.

 

[GreyGhost]

You can roll the dice with it, but Terry is correct..

 

[Terry_w]

Thanks Terry,
My accountant was somewhat optimistic that we can claim this year when I am going to pay (owing for 4 years). Will share your input with them.

Issue

Are arrears of land tax deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in the year in which they are paid?

Decision

No. Arrears of land tax are not deductible in the income year in which the arrears are paid but in the respective income years in which the liability for the land tax was incurred.

http://law.ato.gov.au/atolaw/view.htm?docid="AID/AID2010192/00001"

 

[wobbycarly]

http://law.ato.gov.au/atolaw/view.htm?docid="AID/AID2010192/00001"

I suppose, amongst other reasons, it stops people from "tax-banking" and then claiming it all as a lump sum in a (potentially) high-income year.

 

[cadence]

Thanks Cadence. Same here, I expect to receive for 4 years. Were you hit with penalty and interest?

I don't recall a penalty though it wouldn't surprise me
There was an interest. If you pay lump sum in full you avoid interest. If you want to pay by monthly instalmts, interest applies.

Hope it doesn't hurt too much for you

Oh and the worst part was a week after I paid it I got the notice for this years land tax.

 

[pickle pickle]

http://law.ato.gov.au/atolaw/view.htm?docid="AID/AID2010192/00001"

Thanks for the id Terry. Has this been tested in the courts? I disagree with the ato on this. Anyway the ato does have the discretion to allow an amendment after the time period if the taxpayer requests it.

 

[Terry_w]

Thanks for the id Terry. Has this been tested in the courts? I disagree with the ato on this. Anyway the ato does have the discretion to allow an amendment after the time period if the taxpayer requests it.

It seems from the ID that the courts have considered it in relation to payroll tax:

The Federal Court confirmed this principle, in the context of payroll tax, in Layala Enterprises Pty Ltd (in liq) v. Federal Commissioner of Taxation (1998) 86 FCR 348; 98 ATC 4858; (1998) 39 ATR 502.

 

[pickle pickle]

Had a quick read of the case. Could not see anything that said deductions are claimed when they are incurred not paid for the cash basis accounting system.