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Land tax – frequently asked questions and the new foreign land tax surcharge

Why do I have to pay a proportion of land tax at settlement when I’m purchasing the property as my principal place of residence?

If the person selling to you has a land tax liability in respect of that property, then the standard form contract makes provision that this is to be apportioned between you and them at settlement. This is consistent with the provisions of the Land Tax Act, which provides the seller is entitled to a fair proportion of that liability from the purchaser at settlement. You can change this standard position by contracting out of it.

Rates and body corporate fees are treated in a similar way under the standard form contract.

If you are going to use the property as your principal place of residence from 1 July following settlement, make sure you let your lawyer or conveyancer know this so they can notify the State Revenue Office accordingly as part of the settlement process – this should ensure the property is reclassified as principal residence land and exempt.

Is land tax payable if a company owns my principal place of residence?

A company may be eligible to have the land classified as principal residence land, if a shareholder in the company:

  • lives in the property; and
  • owns at least 50 percent of the shares in the company on 1 July of the applicable year.

The shareholder must not own other principal residence land. Similar rules may apply for trust owned property in which a beneficiary of that trust resides.

Can a block adjoining my principal place of residence also be classified as principal residence land?

If you own a block of land that adjoins your residence, then the block may also be classified as principal residence land. You will need to own at least 50 percent of the residence as well as at least 50 percent of the adjoining block of land.

The adjoining block of land must also be used together with the residence and the adjoining block cannot be used for income producing purposes.

Foreign investor land tax surcharge

The Tasmanian Government has introduced legislation that enforces foreign investors to pay additional land tax. The foreign investor land tax is an additional two percent of the assessed land value of residential land. Residential land includes vacant land which a dwelling may be constructed and used as a place of residence. It will not apply to land classified as principal residence land.

The surcharge will apply from 1 July 2022. Foreign persons (including companies and trusts) will be liable to pay the land tax surcharge if they acquire residential land on or after this date.