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Section 10R of the Land Tax Management Act 1956 ("the Act") provides an exemption from land tax to the owner of land used solely for the purposes of an aged care establishment as defined in the Aged Care Act 1977 (Cth) and/or a Retirement Village as defined in the Retirement Villages Act 1999 (NSW).
Where land is only partly used for either or both purposes, the owner may be entitled to a reduction in the (average) land value of the land for land tax purposes, equal to the proportion of the land or buildings (or a combination of both) used for an exempt purpose.
The purpose of this Revenue Ruling is to explain how their liability is calculated where they are entitled to a reduction in the land value.
Section 10R(3) provides that if the Chief Commissioner is satisfied that only part of the land is used and occupied for an exempt purpose as a retirement village and/or an aged care establishment, the average taxable value of the land will be reduced by the proportion of the total area of the land so used. Owners are responsible for determining the proportion of the land so used in the first instance. Owners should indicate briefly in their return or an accompanying letter, the basis on which the calculation was made.
Any part of the land which is used for purposes which are ancillary to use as a retirement village and/or an aged care establishment, including curtilage, is also exempt. Such ancillary areas include road and footpath access, parking areas available for staff, residents and visitors, leisure areas for the use of residents such as a swimming pool, a tennis court or a park, or a kiosk or shop(s) whose principal function is to serve residents.
Partial use of land for an exempt purpose
Where land is only partly developed as a retirement village and/or aged care, a partial exemption will apply. Owners may calculate the partial exemption based on the area of land actually in use for an exempt purpose.
Example 1
A owns land with an average taxable value of $10m. The Happy Valley retirement village occupies 40% of the land area. The owner plans to build additional retirement units on the remaining 60% of the land.
The average taxable value of the land is reduced by 40% to $6m.
Development approval obtained for unused proportion of land
Where planning approval has been obtained for the development of the unused portion of land, the calculation of the reduced average taxable value may be area-based as explained in paragraph 5 or based on the number of units of accommodation in the partial development compared with the number of units once the land is fully utilised (if known) will be accepted.
Example 2
The Happy Valley Retirement Village consists of 50 retirement units along with an administration centre, a kitchen/dining/administration building and a swimming pool and other facilities for use by occupants of the village.
The owner obtains development approval to construct an additional 100 retirement units and associated facilities on the undeveloped land.
The average taxable value of the land is reduced by one third, being the number of retirement units constructed on the land (50) divided by the total number of units on the land when the additional units are constructed.
Partial use of a building for non-exempt purpose
If part of a building (or buildings) on a parcel of land is or are used as a retirement village and/or an aged care establishment, the taxable land value of the land is reduced by an “allowable proportion” of the land value based on the extent of use of the building or buildings for the exempt purpose, which includes a purpose ancillary to that purpose.
Section 10R(3C) of the LTMA requires the owner of the land to make an application in writing specifying a proposed allowable proportion. The application must include an explanation of the basis for calculating the allowable proportion and a description of the separate parts of the building or buildings used for an exempt purpose and a non-exempt purpose or purposes, including a diagram showing floor areas and floor levels used for each purpose. Owners may use rental values or floor areas of parts of the building or buildings in calculating an allowable proportion.
The Chief Commissioner may request the Valuer-General to determine the reduced land value to be attributed to the non-exempt portion of the land if dissatisfied with the owner’s application for an allowable proportion, or if the owner does not apply.
If the Valuer-General determines a relevant proportion and serves a notice under the Valuation of Land Act 2016, the owner has the same rights of objection and appeal under that Act as apply in respect of a valuation under that Act.
