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Tax on Property In Deceased Estates – Part II

Watkins Tapsell Estate Planning

Part 2 – Land Tax on real property

Anyone who owns property in New South Wales, other than their principal place of residence, will be required to pay Land Tax regardless of whether the property is vacant land, commercial, industrial, residential, investment or a holiday home. Land Tax is payable even if that property does not earn any income.

The amount of Land Tax payable is based on the combined value of any taxable land that you own in New South Wales (except exempt land) but the value is not based on any structural improvements. It is just the unimproved capital value and it applies even if you have only partial ownership in the land.

A deceased estate will receive an exemption for 12 months from the date of death from paying Land Tax if the property was the deceased’s principal place of residence. The estate will also receive an exemption up until the date the transfer of property is registered at the Office of Land and Property Information, providing it is not more than 12 months from the date of death.

If the deceased’s principal place of residence is still used and occupied as the principal place of residence:

  1. By the person named in the Will who has a right to occupy the deceased’s principal place of residence; or
  2. Someone who lived with the deceased immediately before their death and has the executor’s permission to continue living in the deceased’s principal place of residence, then that occupant is deemed to be the owner and Land Tax is not payable during the occupancy.

From 1 January 2015, the tax free threshold is $432,000 and Land Tax is calculated at the rate of $100 plus 1.6 cents for each $1 the property value exceeds $432,000. A higher rate applies to properties valued over $2,641,000.

Any person preparing a will and any executor of a deceased estate, should take careful advice about the tax implications of the will so that they can manage the risk of unnecessarily incurring a land tax liability.

For more information on tax on property in deceased estates or if you require assistance with any Wills or Estate issues, please contact our Estates and Estate Planning team to help you.