NSW land tax / rental property question

[serrz]

Hi

I have a property in NSW which I purchased in 2012 and started to rent out, with the intention to move in at some future date.

I have just realised that if I have this property as a rental property at 31-Dec-12, I will face a big land tax bill (equivalent to 7 weeks of rent ).

So I am thinking of terminating the lease early and move into the property.

Questions:
1) Is my assessment of my land tax liability correct?
2) Am I able to end the lease early? It is a fixed term lease until May-2013. I am planning to do some medium renovation works before I move in.
3) Given my circumstances are quite flexible, do you think this would be the best outcome?

 

[calvin]

So I am thinking of terminating the lease early and move into the property.

Questions:
1) Is my assessment of my land tax liability correct?
2) Am I able to end the lease early? It is a fixed term lease until May-2013. I am planning to do some medium renovation works before I move in.
3) Given my circumstances are quite flexible, do you think this would be the best outcome?

Hi Serrz,

I don't know enough about Land Tax to comment and would be interested in the response as well. What I do know is Land Tax is the value of the land itself and not the house or contents. There is a threshold and you may come under this (and avoid paying Land Tax) if your land is not above that value. Some further reading here: http://www.osr.nsw.gov.au/taxes/land/, http://www.osr.nsw.gov.au/taxes/land/faqs/ and a training module: http://elearning.osr.nsw.gov.au/landtax/lt_introduction/player.html. Again, please take my comments with a grain of salt!

However, for Q2, I do not believe there are any provisions to end a fixed term lease early for a landlord, unless the tenant has violated the tenancy agreement. Essentially, if your tenant is paying your rent and living within the conditions specified, you have to wait it out. You can ask your tenant to end the lease early, but they are entirely within their right to refuse. The tenant however, can break the contract and depending on whether it was chosen or not, a break fee may be payable.

 

[jrc77]

What's the land value of your IP? Post this and we can check your land tax liability.

Jason

 

[Terry_w]

The exemption from land tax is found in schedule 1 of the land tax management act
http://www.austlii.edu.au/au/legis/nsw/consol_act/ltma1956173/sch1a.html

Good luck in trying to make sense of it!

 

[serrz]

What's the land value of your IP? Post this and we can check your land tax liability.

Jason

Land tax would be about $6,800 - I checked on the OSR website. Land value is about $750k.

 

[Terry_w]

Land tax is levied at 1.6% of the land value in NSW

 

[The Fence]

Hi

I have a property in NSW which I purchased in 2012 and started to rent out, with the intention to move in at some future date.

I have just realised that if I have this property as a rental property at 31-Dec-12, I will face a big land tax bill (equivalent to 7 weeks of rent ).

So I am thinking of terminating the lease early and move into the property.

Questions:
1) Is my assessment of my land tax liability correct?
2) Am I able to end the lease early? It is a fixed term lease until May-2013. I am planning to do some medium renovation works before I move in.
3) Given my circumstances are quite flexible, do you think this would be the best outcome?

Land tax is levied on your second and subsequent properties whether they are rented or not.
Do you have more than one property?

 

[Scott No Mates]

No Fence, land tax is levied on any property other than your owned ppor or exempt properties.

 

[serrz]

Land tax is levied on your second and subsequent properties whether they are rented or not.
Do you have more than one property?

I only have one property, but am over the $396k threshold.

 

[Ace in the Hole]

Land tax would be about $6,800 - I checked on the OSR website. Land value is about $750k.

How did you get this figure?
I checked it for you and got $5764 based on $750k land val.
How did you get the land value figure?

 

[Terry_w]

If NSW and land tax is 1.6% of land value, plus $100 i think, then the figure would be $750,000 x 1.6% = $12,000.

If no threshold had been used then it would be more like
$750,000 - $396,000 = $354,000 assessable
$354,000 x 1.6% = $5664 +$100 = $5764

 

[serrz]

How did you get this figure?
I checked it for you and got $5764 based on $750k land val.
How did you get the land value figure?

sorry I meant $5.8k, typo

so back to the tenant question - what is the best thing to do? Pay the land tax or move in?

 

[The Fence]

Considering you have a fixed term lease it could indeed cost you more than the land tax to end that lease. I say "could" cost more......

And my earlier question was to find out if you lived in a rental or had your own ppor plus this property in question. So to Scott, not wrong mate (now you have a mate!)

To OP, you need to check out the exemption rules to see if you may qualify before making any decision.

 

[Scott No Mates]

sorry I meant $5.8k, typo

so back to the tenant question - what is the best thing to do? Pay the land tax or move in?

It's a tax deduction anyway. So how hard is it going to be yo turf out the sitting tenant?