Tax Tip 8: Forgotten land Tax

Forgotten land Tax


I have met some people who have forgotten to claim land tax and/or thought they were exempt but were caught out. Land tax can only be claimed in the year in which it relates to - not the year in which it was paid. ATO ID 2010/192 (now withdrawn, but law still current).


In some cases it will be too late to amend tax returns and these land tax costs will not be able to be claimed for prior years.


I had a call from an old friend who has a trust which owns 3 rental properties in NSW and has held them for about 10 years - yet they have never paid land tax and didn’t really know about it until I asked him how much he was paying.


The problem is when the property is sold the land tax clearance certificate will not be clear and he will have a large sum payable before settlement. Yet they will probably not be able to claim more than 2 years. As the trustee is liable this will also affect the distributions the trust has made and it will be messy to fix so there would be additional tax agent fees.

So if you haven't already register for land tax and pay it as it is incurred.

 

'So if you haven't already register for land tax and pay it as it is incurred.'
Dear Terry,
could you clarify what this means please?
Thx

 

e.g. in NSW http://www.homebuyer.nsw.gov.au/sites/default/files/file_manager/olt001.pdf

However ,some states may not require registration

 

How would it be possible for the friend to have a trust and never have paid tax? Doesn't the land tax section of the government send a yearly land tax statement to owners (trust) saying the value of the land component & if any land tax is due?

 

Yes it is possible - trust could be running at a loss. No land tax in some situations.

 

Way too common. Land tax clearance certificate is required when you sell land. But the arrears can only be claimed at a specific time. The penalty is not even deductible.

 

Wondering if maybe that friend was owning the property in a trust with personal names as a trustee rather than a company? Therefore the land tax office thought the property was owned in personal names therefore no land tax payable.

If selling the property, wouldn't the land tax clearance certificate then show that the friend had no land tax outstanding in that case? Or the sales contract would say John Smith ATF Smith Family Trust & that could've caught them out?

 

Land tax registration fraud perhaps ? Land tax assessments are issued to those who register. So to achieve your intent you need to fraudulently complete a registration for a human owner. Very nieve approach ? Buy soap on a rope is my tip.

State Govts and Commonwealth share tax data and under the GST agreements and share land records too for GSTand CGT and income tax..So it follows the OSR data match to ATO records you realise....Dont you ? Sorry your stupid friend. I must get three enquiries a year to assist the penalties on this issue. Dont call me. Waste of time.

 

If you never registered and then get a huge landtax bill at the time of sale, can you add the whole amount to the cost base to decrease your CGT?

 

Yes

 

You have to register for land tax?

 

Sorry I should have said "in some states". In NSW yes.

 

In Victoria, make sure you notify the SRO if one of your properties is missing from Land Tax bill sooner, rather than later. Had it happen with my old PPOR I rented out, so I just mailed the SRO advising of my new PPOR address and what date my old PPOR became an IP.

 

Don't stress an old fella out Terry

 

So, in WA if I haven't received a land tax bill, Im in the clear??
I cant understand how we haven't received it. On our rates it gives a rental amount but not a land valuation.. or does it? Any WA people have an answer?

Our ownership differs from house to house maybe that's why we haven't received the dreaded bill??

 

Hi Terry, where can I find some information on these situations? Would some of these scenarios apply to what OSR calls special trusts?
Cheers
Yann

 

Not sure what you mean Yann?

 

In NSW a special trust is a trust that is not a fixed unit trust that OSR NSW has agreed is a fixed unit trust. A SMSF is not a special trust either. A special trust has a land tax threshold of $0. A fixed unit trust has a threshold. However the unitholders must also be considered as secondary assessment can impact them.

 

Have nsw changed their notifications ? I've been registered for years but some time ago fell below the threshold. However, I've not received any notification from land titles for a couple of years. Is this normal? Bit concerned in case I'm now liable again but have not had a bill... And no, not changed address.

 

Hi Terry, sorry if not clear, but you talked about trusts running at a loss, and no land tax in some situations. So I was wondering if there was any correlation between a trust running at a loss (assuming overall loss in an income year) and situations for no land tax. I was only aware of different regimes (threshold or no threshold based on the type of trust, special or fixed for ex), but nothing related to income losses.
Cheers