KEY TAKE OUTS
- What is land tax
- How does this discount affect owners who qualify for it
- What is the purpose of the NSW Government providing this discount
The NSW Government has introduced a 50% land tax discount for new build-to-rent (BTR) housing projects. The discount is available from the 2021 land tax year until 2040. As the name suggests, the dwellings must be new (the development must have commenced after 1 July 2020) and must be occupied by individuals under residential tenancy agreements.
So first things first. What is Land Tax and how is it calculated?
Land Tax is an annual tax charged on all the residential and commercial property you own that is above the land tax threshold (but generally speaking, your principal place of residence is exempt). The general land tax threshold for 2021 is $755,000.
Land Tax is calculated on the total value of all your taxable land that is above the threshold. The rate of tax is calculated as $100 plus 1.6% of the land value up to the value of the premium threshold. The rate of tax increases to 2% after the premium threshold. The premium threshold for 2021 is $4,616,000.
How will the introduction of this land tax discount affect owners who qualify?
Under the BTR scheme your total land value will be reduced by 50%, for land tax purposes. The effect ultimately, provided you meet the guidelines and eligibility criteria, is that your land tax liability will be reduced. Additionally, if you are a foreign owner carrying out a BTR development, you will not incur the additional foreign investor duty or land tax surcharges.
What is the purpose of providing this discount?
By only making the land tax discount available to new developments it is expected that this will help support new construction.
The main purpose though, is to improve rental experiences for tenants. Amongst other things, the guidelines for eligibility require the owner provide a range of lease term choices to tenants and require the dwellings be managed by a single management entity. It’s aimed to provide tenants with greater security and better quality rental services.
Think you might be eligible?
Well, the very first thing you need to know is what constitutes a ‘housing project’ i.e. does this apply to your small local developments? Essentially, depending on what you define as a ‘small development’, no. The development must contain at least 50 self-contained dwellings used specifically for BTR purposes.
ABOUT MELINA COSTANTINO
Melina has over 9 years’ experience as a Licensed Conveyancer, acting for client matters involving; purchase and sale of residential and commercial property, Retirement Village Contracts, Put & Call Options, Call Options, and Family Transfers. She is passionate about helping a wide range of clients across all aspects of the buying and selling process and ensuring that her clients meet all their legal obligations.
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