Toolbox Q & A
Question: I am the owner of a rental property and have heard that land tax may apply to the property. In what circumstances does land tax apply?
Answer:Land tax is a state-based tax and therefore the rules can vary from state to state. A person’s principal place of residence is generally exempt from land tax, however, NSW does levy land tax on the top 0.2 per cent of homes in the state. Currently, that means properties with a land component valued at $1.68 million or more.
Primary production land is also exempt in most states, however, exemption rules can also vary state to state. Therefore land tax mainly applies to investment and commercial properties.
The land tax payable is calculated on the value of the underlying land (that is, the valuation does not include the value of buildings or other structures). The rate of land tax differs from state to state and can also vary according to the type of taxpayer. Rates can be obtained from the relevant Office of State Revenue.
Finally, where land tax is payable on a property and that property is deriving assessable income for the taxpayer, the taxpayer may be entitled to a tax deduction for the land tax payable.
Justine Harris is manager, technical services,IntegraTec .
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