Prior to 1 February 2024, land in NSW may have been exempt from land tax where only one of multiple owners occupies the property as a principal place of residence. This was the case even where some of those owners only owned a tiny proportion of the property.
From 1 February 2024, this exemption from land tax will only be available if the persons occupying the property together own at least a 25% interest in the property.
Transitional provisions provide that those who already claim the principal place of residence exemption from land tax can continue to claim the exemption for the 2024 and 2025 land tax years (ending on 31 December each year) if there is an owner occupier who owns less than 25%. The minimum 25% ownership requirement will then apply to those owners from the 2026 land tax year.
Where the exemption does not apply, each owner may be liable for land tax if the value of all of their combined interests in taxable land in NSW exceeds the tax-free threshold, which is $1,075,000 for the 2024 land tax year.
Example 1: On 1 December 2023 Mum and Dad assisted their son Jordan to buy a home by taking an 80% ownership interest in the property. Jordan took the other 20% interest and lives in the home as his principal place of residence.
All owners were eligible for the principal place of residence exemption from land tax in the 2023 land tax year and will continue to be eligible for the exemption for a further two years.
In the 2026 land tax year no owner will be eligible for the principal place of residence exemption from land tax as the occupier of the property does not own at least a 25% interest. Mum, Dad and Jordan may need to register for land tax in the 2026 land tax year.
Example 2: Take the same facts as Example 1 but change the purchase date to 1 March 2024. No owner will be eligible for the principal place of residence exemption from land tax in the 2024 land tax year or future years as the occupier of the property does not own at least a 25% interest. Mum, Dad and Jordan may need to register for land tax in the 2024 land tax year.
Example 3: Take the same facts as Example 2 but change Jordan’s ownership interest to 30%. All owners will be eligible for the principal place of residence exemption from land tax in the 2024 land tax year and future years as an occupier of the property owns at least a 25% interest.
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