Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper No. 06/1998 by Rachel Simpson and Honor Figgis
Page Content
- Land tax in New South Wales is a tax payable by the owner of land on
the taxable value of all the land owned by that person that is not exempt from
taxation. The taxable value of land is the unimproved value of the land
(that is, without taking into account any buildings or structures or other
improvements) if the land was used for its most productive potential use
(regardless of its current use). This method of valuing land is the called the
site value', and is used as the tax base in most Australian States (pages
11-14). The value of land is ascertained by the Office of State Revenue
on the basis of yearly valuations provided by the Valuer-General's Department
(pages 11-12). This briefing paper gives an outline of the history of land tax
in Australia (pages 2-5), and discusses the advantages and disadvantages of
land tax bases other than site value (for example, capital value or acquisition
value) (pages 12-15).
- There are numerous exemptions from land tax, including: a principal
place of residence, if the land value is less than $1 million; land used for
primary production; land used to maintain endangered animals and birds; land
used for low-cost accommodation; retirement villages and nursing homes; land
owned by a public hospital, an area health service, a private hospital not
carried on for pecuniary profit, a charitable, religious, sporting or
educational institution not carried on for pecuniary profit; an association or
industrial organisation of employers and employees; an aboriginal land council,
a public cemetery or crematorium, or a State-Government owned corporation
(pages 8-11).
- In New South Wales a flat rate of land tax is imposed. The threshold
for liability to pay land tax is a taxable land value of $160, 000 for land
that is not a principal place of residence; where the land is a principal place
of residence, the threshold taxable land value is $1 million. The New South
Wales land tax regime was altered significantly by the 1997-98 State
Budget handed down by the Treasurer in May 1997. The main provisions
affecting land tax contained within the budget were: an increase in the rate of
land tax from 1.65% to 1.85% for the 1998 and 1999 land tax years, falling to
1.7% thereafter; and imposing liability to pay land tax on owner-occupied
residential land over a threshold of $1 million. The current rate of land tax
in New South Wales is illustrated in the following table (pages 15-16):
| Taxable
value as assessed (non residential) | Land Tax payable |
| Less than
$160,000* | Nil |
| $160,000 | $100 |
| More than
$160,000 | $100 plus 1.85%
of the excess over $160,000 |
| Taxable
value as assessed (residential) | Land Tax payable |
| Less than $1
million | Nil |
| $1
million | $100 |
| More than $1
million | $100 plus 1.85%
of the excess over $1million |
- Total revenue to be raised from land tax in 1997-98 is estimated to
be $786 million, an increase of 25.8% over 1996-97.
- The land tax system is administered by the Chief Commissioner of State
Revenue, as head of the Office of State Revenue. The Chief Commissioner
ascertains the taxable value of land and issues notices of assessment of land
tax liability (pages 17-18). There are mechanisms for a taxpayer to object to
the assessment (including to the valuation of the land), and if the
objection is not successful, to appeal to the Supreme Court. If the
objection relates to the valuation of the land, the appeal is to the
Land and Environment Court.
- There are provisions for relief in the case of serious hardship.
Applications for relief are dealt with by a Hardship Board, which has the power
to waive liability to pay land tax wholly or in part. The Board may also, in
such cases as it thinks fit, defer payment of the whole or part of any
land tax for any period. Retirees on a pension or with limited income
insufficient to pay land tax on their principal place of residence will be able
to defer payment of the tax, with interest at the market rate (currently 8.8%).
The tax and interest will be recoverable from their estate or from proceeds of
sale if the property is sold (pages 18-19).
- New South Wales is the only State to impose a flat rate of land tax, with
the other States imposing progressive tax rates with various degrees of
complexity. The briefing paper summarises the land tax systems in the other
Australian States, and the amount of revenue it is estimated that each
State will raise from land tax in 1997-98. In brief, Victoria estimated that
land tax will raise $427 million (page 21); the Queensland estimate is $197.6
million (although the Queensland Government has announced its intention to
phase land tax out completely) (page 23); the Western Australian estimate is
$168 million (page 25); the South Australian estimate is $137.9 million; the
Tasmanian estimate is $27.4 million (page 28); and the ACT estimate is $29
million (page 30). There is no land tax in the Northern Territory.
- This briefing paper also outlines the status of land tax in some other
Commonwealth countries. New Zealand no longer has a land tax, having
abolished it in 1990 (pages 31-32). The United Kingdom has not had any
form of land tax since the Development Land Tax (which was very different to
land tax as imposed in Australia) was abolished in 1985 (page 32). In
Canada, the imposition of land tax is largely the domain of local
government, although the governments of some of the Provinces levy taxes on
land value. These taxes vary widely across Canada, and tend to be significantly
different from Australian land taxes (pages 33-34).
- Finally, this briefing paper identifies some potential problems with
land tax in New South Wales (pages 34-39):
- the effect of inflation;
- the effect on pensioners and self-funded retirees;
- the effect on rental prices;
- what happens where taxpayers are unable to pay their tax
assessment.
