Concession for Unutilised Land Value of land containing a single dwelling-house

(Sections 9A and 621-62N - Land Tax Management Act 1956)

Preamble

1. Land is eligible to have an unutilised value allowance (“UVA”) determined for the purposes of assessing land tax for a particular land tax year under section 62J of the Land Tax Management Act 1956 (“LTMA”). The UVA will apply if the land is:
   1. a parcel of land used and occupied solely as the site of a single dwelling-house and is zoned or otherwise designated for use for the purposes of industry, commerce or the erection of residential flat buildings, or
   2. a parcel of land used or occupied solely as the site of a single dwelling-house and  is zoned or otherwise designated to permit its subdivision for residential purposes.
      
      Note: Certain parcels of rural land which are zoned or otherwise permitted to be used for non-rural use or subdivided into lots of less than 40 hectares were previously entitled to a UVA until the 2023 land tax.
2. The definition of “single dwelling-house” in Division 2 of Part 8 of Chapter 15 of the Local Government Act 1993 (“LGA”) applies for the purpose of determining eligibility for a UVA.  The definition in the LGA provides that a,

   “single dwelling house”  is a dwelling used or adapted for use solely for habitation   by not more than one family and includes a dwelling in a row of 2 or more dwellings attached to each other such as are commonly known as semi-detached or terrace buildings, but does not include a flat.

3. The definition of “flat” for the purposes of the definition of a single dwelling-house is the definition in the section 3(1) of the LTMA applies, that is:
   
   “flat” means a room or a suite of rooms (whether or not forming part of a building or a detached building)—
   1. used or occupied as a separate dwelling-house, or
   2. so constructed, designed or adapted as to be capable of being used or occupied as a separate dwelling.
4. If land is entitled to have a UVA determined, the average land value of the land for a tax year is reduced by the unutilised value allowance determined by the Valuer-General for that tax year (see s.9A(2) of the LTMA).
5. The purpose of this Ruling is to explain the calculation of land tax on the site of a single dwelling-house that is eligible for a UVA, and how an owner of eligible land may apply to the Chief Commissioner of State Revenue to have a UVA determined.

Ruling

What is “unutilised value allowance”?

6. The UVA for a site of a single dwelling-house is defined in section 62L of the LTMA as the difference between the land value of the land for a relevant tax year and the value of the land, if that land could only be used as the site of a single dwelling-house.
7. In determining the UVA for eligible land, section 62L states that:
   1. the land can only be used as the site of a single dwelling-house, and
   2. the area of land in excess of the area that is reasonably necessary for occupation or use in conjunction with a single dwelling-house is not taken into account.
8. The owner of the land may apply to Revenue NSW for the determination of an unutilised value. If the Chief Commissioner is satisfied the land is eligible for an allowance, the application will be referred to the Valuer-General for determination of the UVA.
9. Land tax is assessed on the average land value of the land minus the unutilised value allowance for the relevant tax year.  If the average land value for a tax year is less than the UVA, the average land value is reduced to $0.  
   
   Example 1: Site of single dwelling house zoned for residential flat buildings
   
   John owns a 1-hectare parcel of land which contains a single residential dwelling.  The land is rezoned during 2021 to permit the construction of multiple residential units.  The Valuer-General determines the land has a land value of $5 million for the 2022 land tax year.  The average land value of the land for that land tax year is $3 million.
   
   John applies on-line on the Revenue NSW website for determination of a UVA.  The Chief Commissioner reviews the application and advises the Valuer General that the land is eligible for the allowance.  
   
   The Valuer General makes the following determinations:
   1. The land value of the land for the 2022 land tax of $5 million is reduced to  $1million if it is assumed the land can only be used as a site for a single dwelling, if the area of the land in excess of the area reasonably necessary for a single dwelling house is ignored in determining the value;
   2. The UVA has been determined as $4 million on a land value of $5 million for the 2022 land tax year.

   The 3-year average land value of the land for the 2022 land tax year of $3 million is reduced by the UVA of $4 million.  As the UVA is greater than the average land value, the average value of the land for the 2022 land tax year is reduced to $0.

Reassessment when eligibility for a UVA ceases

10. If the land is sold, disposed of, or ceases to be used or occupied solely as the site of a single dwelling-house, land tax is reassessed for the current land tax year plus the previous 4 years if the owner received the benefit of a UVA for those years.  
    
    Example 2: Reassessment of land on sale of land subject to a UVA
    
    Mary receives the benefit of a UVA on a parcel of land for 10 tax years, from 2011 to 2020ⁱ.  The land was assessed for those 10 tax years, reducing the average land value for each year by the UVA determined by the Valuer-General for each year.
    
    On 30 September 2020 Mary sells the land, and advises the Chief Commissioner of the sale within 30 days of completion of the sale.
    
    The Chief Commissioner reassesses the land for the 5 tax years from 2016 to 2020, using the average land value of the land for each of those years.  Mary is required to pay the difference between the land tax assessed for those 5 years and the amounts previously assessed after applying the UVA for each of those years.  Land tax for the 2011 to 2015 tax years is not reassessed.

Landowners must advise the Chief Commissioner when eligibility for UVA ends

11. The owner of the land must advise the Chief Commissioner within one month after the date on which the land ceases to be eligible for a UVA.  Land Tax will be payable in respect of the year in which the land was sold, disposed of, or ceases to be used or occupied solely as a site of a single dwelling-house, and in each of the preceding years (up to a maximum of 4 preceding years). Failure to advise the Chief Commissioner is a tax default under section 72 of the LTMA, and late lodgement interest and penalty tax may be imposed under the Taxation Administration Act 1996.

ⁱ S. 9A (4) & (5) of LTMA  outlines how reassessments should be issued without the Unutilised Value Allowance once the land is sold.