This is an occasional question from clients who are buying a principal residence from an investor.
Land tax is assessed each January 1 for that calendar year.
If the property being sold is not the vendor’s principal residence (or vendor is a company), then the vendor has often received a land tax assessment for the property for the current year.
As this land tax assessment is a periodic outgoing, in accordance with the General Conditions of the contract, the assessed land tax is apportionable between the vendor and the purchaser. Typically, only that component of the land tax assessment that would be payable by the vendor if the land was their only holding is apportionable.
All of this means that the purchaser must compensate the vendor for the purchaser’s apportioned share of the vendor’s current year land tax assessment at settlement, even if the property will be the purchaser’s principal residence. This is a once-off payment.
The purchaser will not have a land tax assessment for the property in subsequent years, if it remains their principal residence.
This issue becomes more significant if the purchase is being settled early in each calendar year (i.e. in January, February or March), when the purchaser’s apportioned share of the land tax assessment is larger than later in the calendar year.
If you are looking for a reliable Melbourne conveyancing company, contact Glenferrie Conveyancing in Northcote on 03 9815 2351 for more information.