Australian Land Tax for Foreign Owners
The government needs to collect tax on your residential property every year. However, you may not know how the government taxes properties you own that aren’t your place of residence too.
Our guide will tell you what land tax is, what it applies to, what the assessment entails and more.
What Is Land Tax in Australia?
Land tax is a tax by the Australian government that targets the properties you own that aren’t your place of living. This is an annual tax. Your principal place of residence is entirely exempt from it.
Additionally, exemptions also apply to any commercial property that you own.
Some of the properties that land tax applies to include:
- Properties you purchase for investment purposes.
- A holiday home (can be in Australia if you’re an expat).
- A piece of vacant land that you own.
- An industrial unit.
- Any land that you lease from the Australian government.
- Jointly owned land; you must declare your interest or share in jointly owned land and pay land tax on it.
If you are an Australian expat who needs to pay land tax, the government classes you as a foreign owner. So, you also need to pay a foreign ownership surcharge (this is 0.75% of the average unimproved value of your property per year).
Let’s say you purchase a new property that you believe is not exempt from land tax. In that case, you must inform the commissioner for ACT revenue. If you don’t do this, you can face land tax charges.
What Is A Land Tax Assessment?
A land tax assessment is how the government works out what your properties are and how much land tax you must pay each year.
They determine how much you need to pay on a property by assessing its value yearly. They do this with methods respected and recognised in the tax evaluation industry. These methods include evaluating the property’s sale and other details (like improvements).
Concerning property improvements, The Office of the Valuer General doesn’t count any improvements made to improve the house’s structure and keep its integrity.
Instead, they only count improvements you make to the house for cosmetic reasons; some of these improvements include:
- Adding extra draining or cleaning the current drainage system.
- Filling any gaps in the property.
- Retaining walls by painting or filling them.
- Excavating any part of the property.
- Grading or levelling any piece of the land.
- Removing rocks, soil or sand from the property.
- Clearing any timber (or any other wood) or vegetation like vines or flowers from the property.
Once they complete the valuation, they will send it to you. However, the number the evaluators send won’t necessarily be the number you must pay. If you disagree with the final valuation, you can send an objection to them.
Before sending an objection, you must ensure you make it while a land tax assessment is in force. It must be between 1st July and 30th June in a financial year. Additionally, you must file your complaint within 60 days of receiving your first notice from the rating authority.
Also, remember that you must lodge multiple objections if you want to dispute land tax assessments on numerous properties.
Do I Have to Pay Land Tax in Australia if I am a Foreign Owner?
Yes, you’ll be liable for land tax if you’re a foreign owner. You can use a few methods to pay your land tax on properties.
Credit Card
To pay for your yearly land tax outright, you can head to your local government’s State Revenue Office website and pay for it using a credit card.
To pay for outstanding land tax using a credit card, you can select it on the revenue line payment page after selecting ‘land tax’.
Remember that you will have to pay 0.45% interest on your credit card payment when you pay your land tax.
BPAY
If you prefer to pay your land tax directly from a savings account, you can do it with BPAY.
To make the land tax payment, you need to look at your land tax assessment notice and find the reference number and the biller code.
You can then make the payment from your online bank account (you can also make the payment via your bank’s telephone service).
AutoPay
AutoPay (or any other viable instalment system) will likely be the most popular option for many people because you can make land tax payments in multiple instalments.
With AutoPay, you can spread these payments over a maximum of 38 weeks if you need a more extended period.
Additionally, you can make these payments every two weeks if you want to, or you can make them monthly. Finally, if you can afford higher costs, you can even choose to pay the land tax across four instalments (equal in value).
How much is the Australian Land Tax for Non-residents and Foreign Owners?
The easiest way to calculate your land tax payable is to use a land tax calculator; this gives you an estimated land tax amount.
However, the tax calculator won’t be completely accurate. For example, a land tax calculator will not count aspects like tax penalties or any interest you must pay.
You can also calculate your land tax payable yourself. However, before calculating it, you must understand that land tax has two parts.
The first part is the fixed tax charge, which is a fixed payment of $1392.
The charge that will be unique in value is the evaluation charge; the charge is the average of your property’s unimproved value over several years. For the 2022-2023 financial year, the evaluation will consist of your property’s unimproved value over 2018, 2019, 2020, 2021, and 2022.
If you purchase a new property, the evaluation will consider the previous years of the property (before you owned it).
The ACT revenue office will make these calculations for every property you own, giving you a total outstanding land tax valuation at the end.
What Is Land Tax Liability, And Why Is It Important When Calculating Your Land Tax?
Land tax liability is an indicator of whether your property is viable for land tax or not. It is essential to know the land tax liability of your properties because you can face penalties if they are liable and you don’t declare them.
Properties that land tax applies to include ones you purchase for investment purposes, holiday homes, vacant land, an industrial unit, and any land that you lease from the Australian government.
There are also several exemptions for land tax liability that you should know before wrongly declaring your property. None of these exemptions apply if a trust or corporation owns the property.
Your Principal Place Of Residence
Your home is the most important property that is exempt from land tax.
If you live in your home from the first day of a quarter in the assessment cycle (this can be the 1st of July, 1st of October, 1st of January or the 1st of April), you don’t have to pay land tax.
A Home That You Recently Move Into
If you purchase a new home and declare it as your principal place of residence, you don’t have to pay land tax on it.
To get the land tax exemption, you must move into your new home within the first three months of the purchase; it also cannot be a rental property (unless you stop renting it and change it to your home).
You should ensure your previous land tax payments are up to date (and your certificate of rates) by contacting a legal advisor.
A Home That You Move Out Of To Move Into A New Residence
If you change your principal place of residence by moving into a new home, you will have a land tax exemption for the first financial quarter; this gives you time to sell the property. However, if you decide to make the property a rental opportunity, you must still pay land tax.
Deceased estates and life tenants
An estate with a deceased owner is exempt from land tax for two years after the owner’s death.
The two years give time for the estate to become the property of the owner’s beneficiary.
Unoccupied Home Due To Loss Of Independence
You don’t have to pay any land tax on your primary residence for up to two years if you can’t occupy it because you lose your independence.
You can make a loss of independence claim if you are a patient at a hospice or hospital, at a mental facility, at a nursing home, or if you have a full-time eligible carer.
Home Is Unfit For Occupation
You get an indefinite exemption from land tax if you can’t occupy your home for the following reasons.
- It is under construction for damages.
- It is undergoing renovations.
Zero-fee Rent Agreement
Foreign owners don’t have to pay land tax on a home occupied by someone who is living there rent-free.
How To Apply Land Tax To Your Tax Return If You Are A Foreign Owner
After receiving your land tax assessment, you can add it to your tax return. You can do this in multiple ways.
Online
You can pay for your land tax with an online ATO form.
The online method is the quickest way to add your land tax to your tax return; it processes in around two weeks.
Use A Registered Tax Agent
You can use one of these to ensure that you correctly apply land tax to your tax return without any mistakes.
Keep in mind that you will have to pay for their services; for some, the cost is worth it if the registered tax agent can guarantee a perfect tax return form.
Paper Tax Return Form
For older expats, an online tax return is not the most straightforward format or not the one they find the most comfortable.
Instead, they can fill out a paper tax return, add their land tax amount, and mail it to the Australian Taxation Office.
A Final Summary On How Much Land Tax A Foreign Owner Can Expect To Pay
What a foreign owner must pay for land tax will depend on the number of properties they have with land tax applied to them and the value of those properties.
Additionally, they must remember that they will need to pay a foreign ownership surcharge (this is 0.75% of the average unimproved value of your property per year).
They can receive their land tax amount after an assessment and then add it to their tax return (via an online form, for example).
Frequently Asked Questions
The land tax assessor will calculate your tax for you, but if you want an estimate, use a land tax calculator.
Remember that the calculator won’t account for your foreign ownership charge.
Usually, land tax is an annual charge. However, you may have to pay it more than once yearly if you have multiple properties.
You should know that if you own property in a country that isn’t Australia, you don’t have to pay land tax on it.
The best way to apply land tax to your tax return will depend on what method suits your preferences.
For example, you can fill out an online form if you want an easy and fast solution. Other options include going through the process with a registered tax agent or filing a paper tax return.
Yes, as a foreign owner of land in Australia, you will generally be subject to capital gains tax (CGT) on any gains you make from the sale of the land.
However, the specific rules around foreign resident capital gains tax can be complex. It may depend on various factors such as the type of land, your residency status, and the timing of the sale. It’s important to seek advice from a tax professional who can provide tailored advice based on your individual circumstances.
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