While NSW land tax does not form part of our guidance as a buyer’s agent when engaged by both home owners and investors, we wish to familiarise our clients with the current ongoing costs of holding investment real estate in NSW.
While buyers budget their acquisition costs, interest payments, property management fees, council rates, water, strata levies and maintenance, there remains one other and sometimes ignored cost that investors do not budget for, namely the NSW land tax.
Australian land tax began back in 1910, when a land tax was introduced by the Commonwealth Government.
Times have changed, yet most Australian state governments are still collecting this tax despite the changed circumstances from its original intentions.
Investors need to be aware of the possible applicable NSW land tax when buying property.
NSW land tax is calculated at midnight on the 31st December of each year, on the combined value of all taxable unimproved land you own, above the current threshold. This includes land owned jointly with another party and regardless of whether income is derived from the land.
The value of the land is determined by the NSW Office of State Revenue. They use the value supplied by the Valuer General of NSW, who values the land as at the 1st July.
The Office of State Revenue uses the value declared in the year before the current tax year. For example, the 2015 value of your land is used to assess your 2016 tax year.
The applicable land tax is calculated on the total value of all your taxable land above the current NSW land tax threshold.
Naturally, any purchaser of NSW real estate should be seeking advice from their accountant, legal advisor and/or financial planner or at least visit the website of the respective office of state revenue in their state.
When considering ongoing property costs, NSW land tax needs to be factored in and planned for, especially if the investor is planning to purchase more real estate in the future.