Is land tax tax deductible?
Yes, you can deduct land tax when the land produces rental income. According to the ATO, rental income from a property lets you claim land tax as a deduction. No deduction applies to land tax on a home, and the same is usually true for vacant land. No GST applies to land tax.
Land tax you can deduct
What matters is how the land is used, not which state levied the tax. Among the common rental property expenses the ATO lists, land tax sits beside council rates and water charges.
- Property that is rented out. Land tax can be deducted for the income year that the liability covers, not for the year in which you pay it.
- A business operated from home. Land taxes appear as occupancy expenses, and you may claim them for the business part of the home.
- A holiday home you also rent out. Under the ATO, land tax can be deducted immediately only when the property was mainly used or held for rental income.
Land tax you cannot deduct
Land tax on the home where an owner lives is a private cost. Most states exempt the home from land tax in any case, so there is nothing to claim.
The biggest trap is vacant land. According to the ATO, holding costs incurred for vacant land on or after 1 July 2019 cannot be claimed. That covers land taxes and interest along with council rates. Companies are an exception, along with land used for a business and land a primary producer holds.
Arrears and part years for land tax
Sometimes a revenue office issues an assessment that reaches back to earlier years. The ATO says arrears paid must be claimed through an amendment to the tax return for the year concerned.
The ATO adds that no apportionment is needed for land tax in the year an owner moves into the property or sells it. You must declare as rental income any land tax adjustment the buyer gives you at settlement.
Does land tax have GST?
No. Land tax is a state tax. Under Division 81, the ATO states that taxes are GST-exempt. A land tax notice shows the full amount, and there is no GST for you to add or claim back. The same applies in Victoria, NSW and every other state.
For a seller registered for GST, settlement can change the picture. Settlement adjustments for costs such as rates count toward what is payable for the property and belong on the activity statement, the ATO says.
Save the notice
The ATO includes assessment notices for land tax and proof of payment in the records listed for an occupancy expense claim. Registered tax agents can explain how the rules affect one owner's affairs; this site provides general information only.
Questions
Is land tax tax deductible?
Yes. It applies when the land earns rental income or is used for a business. Land tax is not deductible on a home, and costs of holding vacant land generally cannot be claimed after 1 July 2019.
When is land tax deductible according to the ATO?
In whichever income year the land tax liability belongs to, provided the land is used to earn rental income. According to the ATO, this still holds when you pay it in a following year.
Does land tax include GST?
No. Under Division 81, taxes paid to Australian government bodies are GST-exempt, and land tax is a state tax.
Is land tax deductible in NSW and Victoria?
Every state has the same rule here, because the deduction forms part of federal income tax. For a rental property, NSW or Victorian land tax is deductible; for a home, or for most vacant land, it is not.
Is land tax on vacant land deductible?
Usually not, for costs incurred from 1 July 2019 onward. The ATO permits exceptions for companies, for some trusts and funds, for land used in a business, and for land a primary producer holds.