Land Tax Trap when moving into a rental property in NSW

In NSW land tax is assessed on a person’s land holdings as of 31 December each year. The principal place of residence (PPOR) is generally exempt from land tax so it is commonly thought that it might save you land tax if you moved in to a rental property just before 31 Dec as opposed to just after as the taxing date is 31 December each year.

 

However, there is a bit of a trap for young players with this as the legislation is designed to try to prevent people moving in for a brief period and claiming the exemption and moving out again.

 

The legislation for this is found under Part 2 of Schedule 1A of the Land Tax Management Act 1956 (NSW).

Clause 2(2)(a) states that for a property to be the principal place of residence of a person it must be occupied since 1 July.

 

But there can still be a hope because the next subclause (b) gives the commissioner some discretion in applying (a). If you can convince the Commissioner that the land is occupied and used as the PPOR you can still have a chance of getting the exemption.

 

The way to get the discretion exercised is not to try to call up Revenue NSW and ask to speak to the Commissioner, but to submit a private ruling application, outlining your case with the evidence and make your case.

 

Example

Bart has several investment properties in NSW but still lives at home with his dad. Bart wants to avoid land tax on the most expensive property and his tenants are moving out in Dec on 28th. Bart plans to move in on the 30th Dec 2018 and out of the property again on the 2nd of Jan just before his new tenants move in.

Bart won’t be able to get the PPOR land tax exemption because he hasn’t lived there since 1 July 2018.

It is unlikely the Commissioner will accept that this is the PPOR of Bart because Bart is only moving in for a few days.

Written by Terry Waugh, CTA & lawyer at Structuring Lawyers, www.structuringlawyers.com.au

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