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Changes to Land Tax for ACT Residential Properties

Substantial changes to the ACT land tax system for residential properties came into effect on 1 July 2018. As the one-year anniversary approaches, we look at how these changes may impact ACT property owners in unexpected, and possibly unintended, ways.

New Land Tax Regime

Previously in Canberra, only residential properties that were rented out were liable for land tax. This position has now been modified so that all ACT residential properties are subject to land tax, unless they fall into one of the few categories of exemption.

This change in the regime has meant that properties which are left vacant, even though unrented, are now subject to land tax. Traditionally, this had not been the case.

What are the Exemptions?

An owner may be exempt from paying land tax if they fall into one of the following categories:

  • The property is used by the owner as their principal place of residence and they were residing in the property on the first day of the quarter (i.e. the first of January, April, July or October);
  • The property is being purchased as a principal place of residence;
  • The owner is moving out of the property so that it will no longer be their principal place of residence;
  • Following the death of an owner where the property was used as their principal place of residence;
  • If the property was the principal place of residence of the owner, however the owner can no longer live independently in that property;
  • The property is unfit for occupation; or
  • The property is occupied by a person rent-free or for ‘nominal’ rent.

Note: If the property is owned by a company or a trustee, then land tax is payable on the property.

This list gives a brief outline only of some exemptions available, further terms and conditions do apply.

Notification of Change to Property

A subtle change has occurred in relation to when an owner must advise the ACT Revenue Office of their land tax responsibilities. It used to be assumed that land tax did not apply to the property unless the owner of the property advised the ACT Revenue Office that the property was rented (noting that owners had a duty to advise if it did).

Today, it is assumed that all residential properties are subject to land tax unless the owner of the property notifies the ACT Revenue Office that one of the exemptions apply at the time of purchase or after a change in ownership.

Additionally, an owner is responsible for notifying the ACT Revenue Office if an exemption no longer applies to the property within 30 days of that change occurring.

Owners are able to notify the ACT Revenue Office of changes online using the ‘Land Tax Notification Form’ or ‘Land Tax Self-Assessed Exemption Form’.

Failure to Notify

As was the case under the previous regime, if an owner fails to notify the ACT Revenue Office that the property is liable for land tax this can be considered a tax default. This means that the owner may be liable for interest and penalties in addition to any unpaid land tax.

Need Advice?

You may wish to contact our Property Team to understand how land tax may apply in your circumstances if you own property in the ACT and:

  • Your property is vacant;
  • You are moving out of your principal place of residence (including sale of property);
  • You are moving into a new principal place of residence (including purchase of property);
  • There is a second dwelling on your property that you are renting out; or
  • Your property is owned by one or more foreign persons.

For advice regarding your land tax obligations, contact the Tetlow Legal property experts on (02) 6140 3263 or at [email protected].