In the contract for sale of land, some vendors will indicate that land tax is adjustable on the settlement – regardless of whether the property was used as an investment property by the vendor or not. If you are buying the property and have been given the contract, check to see whether land tax has been marked as adjustable (you can find it on the front page) as this will have a financial consequence which could see you paying more on settlement.
What is land tax?
Land tax is:
- a state tax that applies to all land in New South Wales
- calculated according to the value of the land (1.6% of the land value)
- assessed at midnight 31 December for the following calender year (ie, 1 January to 31 December)
- calculated on the combined value of all the taxable land you own. This is defined as the combined value of the land less the “threshold amount”. If the combined value of all land you own does not exceed the “threshold amount”, then no land tax is payable. In 2012 the threshold amount is $396,000.
Generally, your principal place of residence is exempt from land tax. You are likely liable to pay land tax if you own investment property, commercial or industrial units, or vacant land.