9 December 2019

Spotlight on NSW land tax compliance

It’s beginning to look a lot like Christmas – and that means it is also NSW land tax season.

With 31 December 2019 quickly approaching it is time to ensure you have been fully complying with your NSW land tax obligations. With compliancy holding even more weight this year, as the NSW Government is launching a crackdown on land tax compliance.

Land tax in NSW is ordinarily payable when a land owner has aggregated taxable landholdings above the tax-free threshold ($692,000 for the 2019 tax year). However, this liability will depend on the nature of the land owner (e.g. individual, company or trustee) and the availability of any potential exemptions or concessions from land tax.

Common examples of omissions and misstatements that cause land owners to not be fully compliant with their NSW land tax obligations include:

• the landholder entity is not registered for land tax when they are required to be;

• the landholder entity is incorrectly claiming the principal place of residence exemption;

• the landholder entity is incorrectly claiming the primary production exemption;

• the landholder entity is not disclosing that it acts in the capacity of a trustee rather than in its own capacity; or

• the landholder entity is not disclosing that it is a foreign person for land tax surcharge purposes.

Are you certain you are compliant with all your NSW land tax obligations?

It is now more important than ever to know whether you are compliant with all your NSW land tax obligations.

In addition to the general crackdown on NSW land tax non-compliance, Revenue NSW are also looking specifically at discretionary trust arrangements to ensure that those which hold residential property in NSW are subject to the land tax surcharge if the terms of the trust do not irrevocably disallow foreign persons from being or becoming beneficiaries under the trust.

Improved information management and funding for additional compliance officers as a result of a new investment of $7.1M from the NSW Government to help identify land tax avoiders and is expected to recoup $100M in the first year of the crackdown.

If your NSW land tax obligations are not in order, consider action before 31 January 2020 to qualify for amnesty

Where a landholder entity is not being assessed for the appropriate amount of NSW land tax due to the omissions or misstatements mentioned above, they open themselves up to potential penalties and interest costs in relation to any underpayment of land tax for current and previous land tax years.

For example, failure to disclose a trustee relationship such that the tax-free threshold has been claimed incorrectly by a landholder, results in an underpayment of NSW land tax of approximately $11,000 per annum. Add to this penalty tax at up to 75% of the tax default which may also be increased by a further 20% and penalty interest at rates of approximately 9-10% per annum and the potential costs of non-compliance very quickly become substantial.

Landholder entities who are not compliant with their land tax obligations because they may not have been aware of their NSW land tax liabilities or incorrectly reported exemptions or concessions from land tax because they did not have their records up to date should voluntarily disclose any existing land tax liability before 31 January 2020.

Land tax mistakes that are disclosed before 31 January 2020 (i.e. end of amnesty period) will not incur any penalties.

How can Findex tax advisory help you?

If you are currently not fully compliant in relation to NSW land tax obligations, we can help you liaise with Revenue NSW within the land tax amnesty period to make any required voluntary disclosure. We can also assist if you are unsure as to your obligations or require guidance as to the correct operation of the NSW land tax provisions.