Property tax

General information

Property tax is an annual tax on property which replaces transfer duty. Eligible first home buyers who choose to opt into property tax will not have to pay upfront transfer duty. Instead, they will pay an annual property tax.

Property tax liability arises the first full day following the transfer of the property to the new owner.

Included and Not Included Owners

Everyone that is on title will be either an included owner or a not included owner.

• Included owners fulfill the FHBC eligibility criteria
• Not included owners do not fulfill the FHBC eligibility criteria.

Property tax is payable by the ‘included owners’ of the property. Therefore, a notice of assessment will only be issued to included owners. If there is more than one included owner, they are jointly and severally liable to pay the property tax.

Not included owners will be liable for transfer duty and may be subject to land tax on their proportion of ownership.

Property tax rates

The rate of property tax applied will depend on the class of land use or, for vacant land, the intended use of the vacant land purchased.

For included owners there are 2 classes of land use:

• Owner occupied.
• Not owner occupied.

The owner-occupied rate will be applied when an included owner is using the property as their principal place of residence, or a special treatment has been requested and applied to the land. If neither of these apply, the not owner-occupied rate will be applied.

The table below provides the property tax rates based on the class of land use for 2022 – 2023 and 2023 – 2024.

From 1 July 2024, these rates will be indexed annually to remain in line with average NSW incomes.

Notices of assessment and payment

Property tax assessments will be issued annually on, or after, 1 July each year, in respect of that financial year. Annual Property tax payments will be calculated based on land values from the previous financial year, as determined by the Valuer General, and the owner’s use of land.

Where an assessment is issued prior to 1 August in a financial year, included owners will be given the choice of paying their property tax in one annual instalment or in quarterly instalments. If paying the one annual instalment, payment will not be required until at least 30 days after a notice of assessment or notice of re-assessment has been issued. If paying by quarterly instalments, payment will be due 31 August, 30 November, 28 February, and 31 May in the financial year.

If a notice of assessment or notice of re-assessment is issued within 30 days of the next quarterly payment due date and the included owner has opted to pay via instalments, the due date for payment will be the following quarterly instalment due date.

A property tax payment deferral may also be available for people who suffer serious hardship.

NOTE: The Taxation Administration Act 1996 makes provisions for the administration and enforcement of property tax, including issuing assessments, reassessments and the interest and penalty regimes.

Part year assessment

Part-year assessments will be issued where the land enters the property tax system part way through a financial year. A pro rata adjustment will be made for properties that are owned for less than a full financial year. In these instances, property tax will be payable in accordance with the number of days in the year that the property was owned. If required, a property tax refund will be provided.

Pro rata provision

Where a property is opted in or the included owners advise of changes to the use of land, part-way through a financial year, pro rata provisions will apply. Pro rata provisions will be based on the number of days in the year for which a property has been owned by the included owners and/or the number of days in the year, with the correct rate applicable, for which a property has a particular land use.

Re-assessments

For land that is already subject to property tax, re-assessment will be issued using the pro rata provisions, where:

• The whole or part of the land is sold; or
• The land usage changes, and it results in a change of relevant tax rate; or
• The owner is eligible for a special treatment, and it results in a change of relevant tax rate; or
• The proportion of the land subject to property tax changes; or
• The property’s land value changes.

Included owners are required to inform Revenue NSW of a change in their use of the land within 3 months from the date of the change occurring. An included owner who fails to give notice within this timeframe is taken to have committed a tax default for the purposes of this act and the Taxation Administration Act 1996, Part 5.

Payment will not be required until at least 30 days after the re-assessment has been issued, except in the case a re-assessment is issued for sale or transfer of a property.

Land usage

Mixed use Land

Where part of the land is owner-occupied and the other part is used for other purposes, the property will be treated as mixed-use land, that is, the land will be divided into separate lots (deemed lots) according to its use, the land value will be apportioned between the individual parts, and each part will be separately taxed at the rate corresponding to its use.

Hybrid land

If only a proportion of land is subject to property tax, the land may be referred to as hybrid land. If the property is hybrid land, property tax is payable only on the proportion of the land that is subject to property tax. Therefore, pro rata provisions are applied along with the land value of the property as determined by the Valuer General for assessment and re-assessment purposes.

Change of land Use

Included owners must notify Revenue NSW, via email to [email protected] of any change of land use within 3-months after the change of use (effective date).

Included owners must advise:

• land usage to be changed – i.e., from owner occupied to not owner occupied and vice versa.
• Effective date of each change.
• Attach supporting evidence for each land usage change.
  (Included owners can provide more than 1 land usage change in their email and tax default interest and penalty tax will be reviewed for any changes declared after 3 months)

Indexation of property tax rates

The annual property tax payments will be based on the land value of the purchased property.

These tax rates will be indexed each year from 2024-25, so that the average indexed property tax payment rises in line with average annual incomes. In addition, the year-to-year growth of individual property tax payments are capped at a maximum of 4 per cent (conditions apply).

The fixed component and land value rates of property tax will be adjusted each year, commencing from 1 July 2024 – that is, indexation will not apply before 30 June 2024. The Chief Commissioner will be required to publish the indexed fees and rates (as well as details of the calculations) by notice in the Government Gazette and on the Revenue NSW website by 31 March each year, being three months before the relevant financial tax year commences.

Indexation of fixed component

The fixed component of the property tax will be adjusted each year in line with the published change in nominal GSP per capita.

This can be expressed as:

Fixed component amount for a financial year
=
Fixed Component Amount for the previous financial year
x
Previous Gross State Product per capita indexation factor for the financial year

Over the last 15 years, nominal GSP per capita has been on average 3.2 per cent and increased in all but one year. Therefore, an increase of the fixed component is expected in most years through indexation.

Indexation of land value rate

The land value rate adjustment will be adjusted each year using the land value rates for previous years, the published change in nominal GSP per capita for the financial year and the land value indexation factor for the financial year.

This can be expressed as:

Land value rate
=
Land value rate for the previous financial year
x
Gross State Product per capita indexation factor for the financial year
÷
Land value indexation factor for the financial  year

This means, each year the land value rate will either:

• stay the same, when nominal GSP per capita grows by the same amount as average land values;
• reduce, when average land values grow more quickly than nominal GSP per capita (based on recent history, this is what may occur in most years); and
• increase, when nominal GSP per capita grows more quickly than the growth in average land values.

Liability for property tax

Property tax amount will be the lesser of:

• The property tax indexed amount for the class of land use for the land for the financial year, or
• The property tax amount for the class of land use for the land for the previous financial year multiplied by 1.04 (4% cap).

4% Cap

Where the ownership, usage and land remain consistent for the previous year assessed and the current year, regardless of indexation or land value increases, the assessment will not increase by more than 4%.

The cap does not apply for the following:

• land not subject to property tax in previous financial year.
• where included owners of the land were not included owners of the land in the previous financial year.
• land treated as deemed lots (refer to Mixed use land) with apportionment factor that has been changed in the current financial year or the previous financial year.
• same class of land use was not used at any point in previous financial year.
• land consolidated with other land in the current financial year or the previous financial year.
• land subdivided in the current financial year or the previous financial year.

Special treatments

There may be circumstances where an included owner is absent from their owner-occupied property due to unavoidable circumstances, or for a temporary period after which the included owner intends to return. In certain instances, the included owner may not return, such as moving into a nursing home.

The included owner may make an application to Revenue NSW to apply for special treatment of land use.

Sale/transfer of land subject to property tax

Property will remain subject to property tax until it is sold or otherwise transferred. When this occurs, the property will be reassessed and depending on the transferee, its property tax status may cease, be retained, or altered.

As part of the First Home Buyer Choice initiative, a status certificate will need to be requested when selling a property.  There will be no changes to the existing process to apply for a certificate. The application you submit will provide for both Land Tax and Property Tax. No additional charge will be applied.

• After a request is submitted via the CSP, Revenue NSW will perform checks to determine if a Land Tax or Property Tax liability exists for that landowner,
• a joint response will be issued for both taxes, and
• the landowner or their representative can then contact Revenue NSW where a certificate is issued as 'Not Clear' for Land Tax or 'Opted In' for Property Tax to arrange clearance.
• Updated clearance certificates can be obtained via NSW Revenue online

Applying for a certificate

• To apply for a certificate, you need to have an account with one of these service providers:
  • Hazlett Information Services
  • InfoTrack
  • Dye & Durham
• If the property being sold is under contract, you must apply for a certificate and give the buyer a copy at least 14 days before the contract completion date. For contracts completing within 14 days, the buyer must be given a copy on the date that the contract is made. A certificate is issued under Section 47 of the Land Tax Management Act 1956 and Section 49 of the Property Tax (First Home Buyers Choice) Act 2022 for the relevant property.
• Where a certificate is “Not Clear” for land tax or “Opted In” for property tax, further action will be required to arrange payment for any outstanding Land Tax or Property Tax associated with the property on or prior to settlement.
• If the vendor owns three lots in one strata plan, they’ll be processed under one certificate. If more than three lots are involved, you’ll need to lodge more than one certificate.

Where land is sold or otherwise transferred to a new owner (other than a transfer of ownership shares between the included owners of the property) the land ceases to be subject to property tax (and the transfer is dutiable for the purchaser). If the transfer occurs part way through a financial year, the pro rata provisions will apply, and any property tax paid in respect of the remainder of the year will be refunded.

Cease liability

The property ceases to be subject to property tax when:

• The owner dies, unless the property is subject to an eligible life estate or
• The property is sold to an unrelated person (note: a related person is as defined under Duties Act 1997) or through a transaction where full ad valorem duty is payable at a rate not less than the general rate.

If land subject to property tax is partly sold, or part of its ownership is transferred, the remaining part continues to be subject to property tax. If only a proportion of land is subject to property tax, the property tax payable must be reduced proportionately.

Deferral

For land that is owner-occupied, there are grounds for deferral if the payment of the property tax would cause an individual to be unable to meet basic living expenses.

The included owner may apply for deferral of payment of property tax and is encouraged to attempt negotiation of payment options with Revenue NSW in the first instance.

Effect of Deferral

• Unpaid property tax continues to be a charge on land even if Revenue NSW approves deferral of payment.
• Interest is payable on the deferred unpaid property tax.
• The rate of interest is the relevant interest rate set out in section 37.
• Unpaid property tax, the payment of which is deferred, is payable in the next financial year or at a later time specified by the Revenue NSW unless:
  • a further application to defer the payment is approved by Revenue NSW; or
  • Revenue NSW specifies a later date for payment.

Hardship Review Board

At any time, the included owner can contact the Hardship Review Board (HRB) and has the right to apply for hardship online. All decisions of the Board are made independently of Revenue NSW.

The Property Tax (First Home Buyer Choice) Act 2022 advises the HRB may:

• conduct a review of a decision by Revenue NSW to defer, or refuse to defer, payment of property tax, and
• Exercise its functions under the State Debt Recovery Act 2018 and the Taxation Administration Act 1996 in relation to property tax

If an included owner wants to appeal our decision on deferral of payment, they can:

• visit the Hardship Review Board
• call them on 02 7808 6946
• write to Hardship Review Board, PO Box A2571, Sydney South NSW 1235