Land tax is payable by an individual or entity which owns property with an unimproved capital value (UCV) in excess of $1,075,000. The principal place of residence of an individual is exempt from inclusion in the calculation of land tax. There are also some other exemptions.
Land tax is applied for the full year following the taxing date of 31 December and no pro rata calculation applies. If a person or entity intends to sell a property late in the year, then there can be a saving if the sale is completed on or before 31 December. If not, the UCV of the property shall be included in the land tax calculation unless it is the principal place of residence of the individual (selling the property). Entering into a contract to sell prior to midnight on 31 December does not solve the problem. To avoid the property being included in the land tax calculation, the sale must be completed by midnight on 31 December.
A prudent solicitor shall include land tax as an adjustment in the contract. This means that if there is a chance that completion of the sale shall be later than 31 December, then the land tax shall be adjusted between the vendor and the purchaser (on a pro rata basis) and then responsibility for the ‘lion’s share’ of the land tax shall pass to the purchaser. Of course, if the property (which is liable for land tax) is being purchased with the intention of being used as the principal place of residence of the purchaser, then it is unlikely that the purchaser shall agree to the contract providing for an adjustment of the land tax at completion.
Liability limited by a scheme approved under Professional Standards Legislation