Understand land tax clearance in NSW

How land tax can be transferred with property ownership

A property settlement is a legal process that transfers ownership of a property from the seller to the buyer. It is the final step in selling a property. It is the final step in the property transfer process.

Unpaid land tax is a first charge on land and takes priority over all other liabilities attached to a property. This means a new owner can become responsible for any unpaid land tax from a previous owner, including extra charges like interest and penalties.

A clearance certificate issued under section 47 of the Land Tax Management Act 1956 can protect a buyer from becoming responsible for the unpaid land tax of the seller.

A clearance certificate:

• shows whether there are any unpaid land tax charges on property owned by the seller, and
• provides the opportunity for both parties involved in a property transfer to ensure any unpaid land tax is paid as part of the property settlement.

Buying and selling property overview

The seller is required to provide the buyer with a current clearance certificate for the property, at least 14 days before settlement. This process is generally managed by the solicitors or conveyancers representing the buyer and seller.

For a clearance certificate issued under section 47 of the Land Tax Management Act 1956 to be considered current, it must be issued:

• for the year in which settlement is occurring, or
• no more than three months before the date on which it’s required to be provided to the buyer.

Buying a property

If you are buying a property, to protect yourself from becoming responsible for any unpaid land tax of the seller, you must ensure:

• the clearance certificate shows there is no outstanding land tax charges on the property at the time of settlement, or
• where a clearance certificate shows there is a charge, there is evidence that any land tax payable has been paid as part of the settlement process.

It’s important that the information on the clearance certificate relates to the property being transferred. In cases where the property has been recently subdivided, a current clearance certificate for the parent property prior to subdivision is acceptable.

It’s also important to check the clearance certificate is for the land tax year in which settlement is taking place. A seller may fulfil their obligation of providing a clearance certificate to the buyer with one that was obtained within the last three months. Sometimes, this results in the clearance certificate provided being for the previous land tax year. In these cases it is recommended that the buyer apply for a land tax clearance certificate for the current land tax year to ensure they are protected up to the settlement date.

We recommend that you and your solicitor or conveyancer carefully review the contract of sale from the seller before you sign it. Look for conditions relating to the adjustment of land tax or other charges associated with the property.

After settlement has occurred, buyers may need to lodge a return in order to update their own land tax information or to claim an exemption or concession depending on how the property is used.

Selling a property

If you are selling a property, here is what you need to provide at, or by, settlement:

Option 1: A clear certificate with no charges

You can provide a clearance certificate that shows no charges.

You can get an updated clearance certificate if you previously had an unclear one but have since:

• paid your land tax, or
• cleared your land tax by other means, such as having an exemption application approved by lodging a return.

Use the Clearance certificate updates form to update an existing clearance certificate

Option 2: A certificate with charges plus payment details

Provide a land tax clearance certificate showing charges, along with one of these documents.

Once you pay the amount shown on these documents, any charges on the land will be removed.

An assessment notice

If payment of land tax is not yet due you may provide an assessment notice with the clearance certificate.

Only use this method if settlement is taking place on or before the due date on the notice.

The land item on the notice must:

• appear as 100% owned, and
• match the land item on the clearance certificate.

Full payment of the notice is required for the land tax to be cleared.

Read more about assessment notices and payment options for your notice.

Clearance quote

You must supply the buyer with a clearance quote if the property has not been valued by the NSW Valuer General.

A common example is recently subdivided land.

Learn more about clearance quotes and how to apply.

Settlement letter

If your assessment notice will be overdue by the settlement date of your property sale you will need a settlement letter from Revenue NSW.

Learn more about settlement letters and how to request one.

What happens if land lax is unpaid?

The seller may provide a clearance certificate that indicates there is unpaid land tax. If there is unpaid land tax, payment should be arranged prior to, or as part of settlement.

The responsibility for payment of land tax between the buyer and seller is usually detailed in their agreement within the contract of sale.

Your solicitor/conveyancer can help explain any land tax adjustment terms in your contract of sale.

If unpaid land tax is not paid on or prior to settlement, the buyer can be held responsible to pay it after they take ownership of the property.

Land tax adjustments at settlement

Any conditions within the contract of sale regarding the clearance of land tax charges are a private agreement between the buyer and seller.

Revenue NSW cannot influence any special conditions regarding the payment of land tax within a contract of sale.

Related information

• Apply for a land tax clearance certificate
• Apply for a land tax clearance quote
• Request a settlement letter
• Update an existing clearance certificate or obtain copy