Every state has its own land tax regulations. Below, we clarify some of the more confusing aspects of land tax rules related to the principal place of residence (PPOR) for those planning to be away from their primary residence.

Unoccupied Land Intended to be the Principal Place of Residence (PPOR) – 4-Year Rule

Unoccupied land refers to vacant land or land where an existing building is set to be renovated, demolished, and rebuilt. A tax exemption applies for up to four tax years under the following conditions:

• The land was purchased during the year, or
• The year in which significant steps were taken to enable building work to physically commence on the land, provided that no one other than the owner has occupied the land after its acquisition.

According to Revenue NSW, building work is considered to have physically commenced when demolition has begun, footings are excavated, or other preparatory work is undertaken. However, the preparation and lodgement of plans and development applications do not qualify as the physical commencement of building work.

We have encountered extreme cases where a house was destroyed by fire, and Revenue NSW regarded this as the physical commencement of building work. If you find yourself in a similar situation where your property is damaged or destroyed, and you are unable to occupy the land within four years, we recommend contacting Revenue NSW immediately to discuss your specific circumstances.

Change to principal place of residence – 6 Months 

You might be able to get a PPOR exemption for two homes if you’ve bought a new home but haven’t sold or moved out of your old one by the tax date (31 December before each tax year). Both homes can be exempt for the same tax year if these conditions are met:

• Your old home was your main residence on the tax date or the previous tax date.
• You bought the new home within the 6 months leading up to the tax date.
• You move into and live in the new home as your main residence by the next tax year’s tax date.
• You don’t earn any income from the old home before the tax date during the time you own it.
• This exemption for two properties only applies for one tax year.

Absent from your PPOR – 6 Years 

You can be away from your main residence for up to six years and still keep your PPOR exemption for NSW land tax. For example, an owner may be absent during an extended holiday, or the owner may have taken an employment opportunity in another city. 

You’ll still be considered as living in your home during your absence if:

• You lived in the home for at least six months before leaving.
• You don’t own, live in, or occupy another home during your absence.
• You can rent out your home while you’re away, as long as it’s for no more than six continuous months or up to 182 days in the year before each tax date. Each overnight stay counts as one day.

If you rent out your home for longer, it might become liable for land tax the following year unless the rental income only covers basic expenses like council rates, water and energy bills, and regular maintenance (not mortgage repayments).

Basic maintenance includes things like lawn mowing, window cleaning, pool upkeep, and minor repairs. It doesn’t cover bigger jobs like repainting, replacing a water heater, or renovating a kitchen or bathroom.

Reference – Revenue NSW