Question
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25 January 2019

Free and clear

Sale, Purchase, Mortgage, Lease
New South Wales

Asked

Land tax adjustment on settlement

Our question relates to a land tax certificate under s 47 of the Land Tax Management Act 1956.

The 2018 land tax certificate confirmed that there was no land tax owing. We have obtained a new land tax certificate as we are now in the new tax year of 2019 which states that there is land tax charged on the land.

Settlement is in one week. Will the client be required to provide the purchaser with a land tax clearance certificate with no land tax owing on the land or can we prepare an adjustment for land tax?

Thank you

Answered

Thank you for the question.

The rating year for land tax ends 31 December each year. As settlement will occur in 2019, an updated certificate was appropriately obtained.

The certificate does not have to be ‘clear’ when you provide it to the purchaser. Payment can be made and clearance provided on settlement.

The following is an extract from the By Lawyers Sale of Real Property (NSW) commentary:

Adjustment of land tax

Land tax will be adjusted on the sale of land under both contracts only if the land tax has been paid or is payable by the vendor for the year current at the adjustment date, and if the contract says land tax is adjustable. This nomination is achieved by ticking the box on the contract. If the box is not ticked, or an adjustment not provided for by an additional provision, then there is no adjustment.

Whether or not land tax is adjusted, if the land tax certificate shows a charge on any of the land sold, on completion the vendor must give the purchaser a clear land tax (s 47) certificate, which is conclusive evidence that there is no charge on the property for land tax.

Any adjustment between vendor and purchaser is to be calculated on a single holding basis, unaffected by any increase in the rate of tax resulting from the vendor's other land holdings or the vendor's form of ownership such as a special trust or a non-concessional company.

More information is available from Revenue NSW.

Regards

Mentor