Land tax in Tasmania

Don’t get caught paying someone else’s land tax

Land tax in Tasmania is payable on investment properties and undeveloped land. Land tax is not payable on a primary residence. So, how could you end up paying land tax when you buy a home or when you buy land to build your own home?

The answer lies in clause seven of the standard Real Estate Institute of Tasmania Contract for Sale of Real Estate, which you will probably be asked to sign.

The clause says that if land tax is payable, the vendor must pay it up to the end of the financial year, and then you, the purchaser, must reimburse the seller for the portion of time remaining to the financial year end.

To make the explanation simple, here is a real-life example.

Joe and Mary bought a residential building lot near Hobart from a Dr. Smith. They signed the contract to purchase for $217,000 at the end of the third week of June. Settlement took place on 21 July, just after the start of the new financial year. They were slugged with an extra $675 for the land tax that the vendor was required to pay on the undeveloped lot and ended up carrying virtually his entire land tax bill for the year.

Had Joe and Mary been buying a house which had been someone’s investment property, the bill might have been considerably higher.

On the other hand, if Joe and Mary had been buying the same house and land, but the property had been the vendor’s primary residence (so no land tax was payable), then they would have had nothing to pay. The charge could be a big one, and totally unexpected, or it could be zero. You need to know whether you are buying someone’s home or one of their investments.

The time to check this is when you start negotiating the price.

There is no cooling off period when buying real estate in Tasmania. Should you agree a price and pay a deposit, and then query a land tax charge at settlement time, you won’t have a leg to stand on.

Ask the question up front. Is land tax payable? If so, make it a matter for negotiation. You are quite within your rights to ask for the land tax aspect of clause seven to be deleted from the contract. The time to do it is before you sign, not after.

At the least, if the vendor won’t budge on the land tax issue, and you already have their lowest price, you should find out how much your share of land tax is likely to be. There may be just a few weeks of the financial year to deal with and the amount may be of little consequence. On the other hand, you don’t want to be taken by surprise with an unexpectedly large land tax bill.

Tasmanian land tax calculator

The Tasmanian State Revenue Office has a Land Tax calculator and details of land tax rates. Land tax is payable on investment properties – not on a primary residence.