Land tax is levied by the NSW State Government on the 31st of December of every year. The rate of land tax in NSW is nil up to the threshold, and then 1.6% up to the premium threshold. The 2012 lower threshold in NSW is $408,000 and the upper threshold is $2,421,000.
Land values are determined by the Valuer General each year at 1 July, and they are calculated based on the value of the property excluding any buildings attached. Objections to land value must be lodged with the Valuer General, and the Valuer General’s decision can be reviewed by the Administrative Appeals Tribunal. Objections against assessment must be made within 60 days of receiving an assessment. Interest is payable on any outstanding land tax collectible by the NSW Office of State Revenue. If a taxpayer has not paid an outstanding land tax assessment, clearance for the property will not be granted making transfer of title not possible.
Joint owners of land (except those whose interests are exempt) will be assessed and liable for land tax in respect of the land owned by them jointly as if it were owned by a single person. Each joint owner may also be liable and assessed separately in respect of:
- the individual interest in jointly owned land;
- and other land owned severally; and
- the individual interests in any other land.
There are a number of land tax exemptions in NSW. Most commonly, a person’s main residence is exempt from land tax. Unlike the capital gains tax main residence exemption, the person must actually be living at the property on the 31st of December in order to claim the land tax exemption. For each family, only one principal place of residence exemption can be claimed. There is also a land tax exemption for vacant land that is intended to become a person’s principal place of residence provided construction takes place within a certain period and the person occupies the residence for six months on completion.
Land that is zoned and used for primary production is also exempt from land tax in NSW. The primary production enterprise must be substantially commercial in order to qualify for the land tax exemption, and must not be merely a hobby farm.
Boarding houses for low income earners may also be exempt from land tax provided an application is successfully made to the Office of State Revenue and the criterion is met for the exemption. Similarly, retirement homes and sporting clubs may be entitled to a land tax exemption provided an application is successfully approved by the NSW Office of State Revenue.