When we think of 30 June, we typically think of accountants and doing our tax returns however, for property owners, this is an important date in respect of Land Tax.
The liability to pay Land Tax arises on the Registered Owner as at midnight, 30 June each year. Some may be familiar with Land Tax following the news-worthy recent proposed changes by the Queensland government to Land Tax calculations from earlier in the year (which were subsequently abandoned).
We raise the issue of Land Tax at this time of year as, investors looking to sell their properties, should consider the liability for Land Tax and how it is adjusted in the standard REIQ contract.
Land Tax is not imposed on individuals unless and until the total unimproved land value held by them (in Queensland) exceeds $600,000; a threshold which is reduced for companies and trusts to a mere $350,000. Please note this is the aggregate of land valuations only, and does not include improvements such as houses, sheds or other buildings. Accordingly, one with holdings just below the threshold last year may now find themselves liable to pay Land Tax this year (given the recent increases). It should be noted though that an exemption for a principal place of residence does exist.
The standard REIQ contracts for residential properties exclude Land Tax as an outgoing (for the purposes of adjustment of the purchase price). A registered owner that owns the property for even a day into the new financial year, will be liable for the entirety of the Land Tax imposed (in the absence of a special condition). The standard REIQ contracts for commercial property does include an adjustment for Land Tax, however this is only triggered if the unimproved value of the property exceeds $600,000 as clause 2.5 (4) (a) only triggered this adjustment in respect of an assessment that the Queensland Revenue Office would issue if the Seller was one natural person, resident in Queensland, and the lot being sold was the Seller’s only land.
Sellers should take into consideration the timing of settlement of contracts to ensure that they do not settle after 30 June (including by the application of clause 6.2 which allows a unilateral right to an extension of settlement of up to 5 business days) and where they do, the inclusion of a special condition in respect of Land Tax should be included just in case.
Are you looking to sell your home in Queensland or Victoria? If so, don’t hesitate to reach out. Ownit provides seamless and stress free conveyancing to buyers and sellers!
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