The Law & You

Buying & Selling Your Home

I am thinking of selling my property but I am worried about paying the new vendor duty tax. Do I have to pay it and if so, when does it have to be paid?

The new vendor duty applies to contracts or transfers of land-related property and declarations of trust from 1 June 2004 (or options entered into after 7 May 2004).

The vendor is liable for vendor duty and is required to pay 2.25% of the dutiable value of the property, which is the higher of the sale price and the unencumbered land value – not just on the profit made.

Vendor duty must be paid by settlement or within 3 months of execution of a declaration of trust or simple transfer where there is no contract involved. However, there are a number of exceptions and concessions available:

• Sale of Principal place of residence – No vendor duty is payable provided

(i) the vendor has lived in the property continuously for 2 years prior to disposal; or

(ii) the property has been the vendor's principal place of residence for 3 of the last 5 years; or

(iii) if the property has been owned for less than 2 years, it has been continuously occupied for the entire period; or

(iv) if the property is occupied as the vendor's principal place of residence up to 6 months prior to disposal (where vendor buys a new place and moves into it before he sells it) provided no income derived from it; or

(v) if the land is not solely used as vendor's principal place of residence then vendor duty is payable on an apportionment basis; and

(vi) the vendor or any of them is a natural person (not a company).

• Value of Property not Significantly Increased - No vendor duty is payable unless the dutiable value exceeds the acquisition value by more than 12% with a concession available up to 15%.
• Sale of new and substantially new buildings – No vendor duty is payable if they have not been occupied, or if the building is tenanted prior to the first sale provided it is sold within 12 months of the date of completion.
• Vacant land – No vendor duty is payable if vendor substantially improves the land eg re-zoning, remediation works, water and sewerage works.

Other concessions are available for absences from former residences, life estates, couples who separate, deceased estates and the sale of businesses and farms.

The new vendor duty tax is complex and far reaching tax and it is advisable to discuss its implications with your solicitor before considering selling your property. In general, assume it applies unless you can prove otherwise

I own my home as well as a holiday house. Will I have to pay land tax?

If you own property other than your principal place of residence or land used for primary production you will probably be liable for land tax in 2005 as the state government has removed the threshold exemption that excluded land tax up to a determined value.

Land tax is levied on the ownership of land in New South Wales and is calculated on the combined value of all the taxable land you own at midnight on 31st December each year. It includes vacant land, houses, holiday houses, residential commerical or industrial units, company title units, factories, shops, warehouses, as well as property that does not earn any income.

Your principal place of residence is usually exempt, unless you run a business on your property, (eg boarding kennels) in which case you can claim an exemption for that proportion used as your residence.

A new sliding tax scale has also been introduced for 2005:

• 0.4c for each $1 for land valued up to $400,000
• $1,600 + 0.6c for each $1 over $400,000 up to $500,000
• $2,200 + 1.4c for each $1 above $500,000

Ownership of a holiday house as well as your principal place of residence will probably cause you to be liable for land tax in 2005. You will need to fill in a 2005 registration form (initial return) and lodge it with the Office of State Revenue. An assessment will then be mailed out to you. You can pay by instalments or if you pay it in full by the due date you may qualify for a discount.

You should contact the Office of State Revenue or your solicitor as soon as possible as interest is charged for both late lodgement and late payment.

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