Land Tax Liability Amendments
The Land Tax Act 2004 (ACT) (the Act) was amended last year, resulting in many more home owners being liable for land tax. This means home owners must reconsider their tax obligations. As of 1 July 2018, residential properties that are not the owner’s principle place of residence are liable for land tax; meaning both rented and vacant properties are liable for land tax.
Prior to 1 July 2018, land tax liability existed for any residential property owned by a corporation or trustee (other than a trustee for a person under a legal disability) or a rented property. However, the amendments now mean land tax is payable for unoccupied properties as well.
Further, secondary dwellings, such as a granny flat, may also be liable for land tax when rented. This means, for those living in their residential property and renting a secondary dwelling on the same land, land tax is payable as a proportion of the rented floor area. Land tax is not applied to secondary dwellings that are unoccupied.
The Act operates on the basis that if land tax liability arises on the first day of a financial quarter, land tax is payable for that entire quarter. This means, land tax is not applicable for the quarter where an exemption applies on the 1st day, being either 1 January, 1 April, 1 July or 1 October.
If you are purchasing land and claim that it is for the purpose of your principle place of residence, you must move into the property within 3 months from settlement.
Principle Place of Residence
Land tax is not applicable where a property is occupied as the principle place of residence by one or more owners of the property.
However, where a couple in a domestic partnership owns more than one property, only one property is exempt from land tax despite whether they claim to occupy separate properties as their principle place of residence.
In addition to the above, there are certain exemptions in the Act which exclude some properties from land tax. Some exemptions include where a property is:
- unfit for occupation, for instance where construction is occurring;
- occupied for nil or nominal rent;
- owned by person who has lost the ability to live independently in the property;
- residential land that a trustee owns under the will of a deceased person;
- is subject to a life tenancy granted to the life tenant by a will; or
- residential land that a trustee or guardian owns on behalf of a person with a legal disability.
These exemptions are subject to the Act, and legal advice should be sought if you have any questions regarding their application. An application may also be made to the Commissioner on compelling compassionate grounds for an exemption to land tax.
What You Should Do
Notably, it is the taxpayer’s obligation to notify ACT Revenue Office in writing to any changes to their property which may impose land tax liability. Notification where circumstances change, such as where your residential property becomes unoccupied because you move out, must be made within 30 days. This obligation remains with the taxpayer even if the residential property is managed or dealt with in any other way by an agent.
If you do not notify ACT Revenue Office of your liability to pay Land Tax, you may be liable for significant interest and penalty tax.
For more information or advice regarding your land tax liability or the operation of an exemption, please contact our office here.