Changes to the Principal Place of Residence Tax Concession in NSW: What You Need to Know

The New South Wales (NSW) Government announced in its 2023-2024 State Budget significant changes to the Principal Place of Residence (PPR) land tax exemption which took effect on 1 February 2024.

These changes are aimed at refining the ownership criteria for the PPR exemption, which provides land tax relief for individuals who use and occupy a property as their principal residence.

Key Changes Effective from 1 February 2024

Under the revised laws to the PPR exemption, to qualify for the PPR exemption, the following conditions must be met:

Minimum Ownership Interest: The property owner(s) who occupy the property as their PPR must have at least a 25% interest in the property, either solely or combined. This marks a departure from the previous requirements, where there was no specified minimum ownership threshold.

Transitional Provisions for existing owners

For pre-existing homeowners or those who purchased a property by 31 January 2024, the transitional provisions will apply if the PPR exemption was claimed by 31 January 2024.
The transitional provisions mean that eligible landowners will not have to pay land tax for the 2024 and 2025 land tax years, even if they own less than a 25% interest in the property.
However, under the transitional provisions, these landowners will start being levied with land tax from the 2026 land tax year onwards if the minimum 25% ownership threshold is not satisfied at the relevant taxing date.

Persons purchasing a property on or after 1 February 2024, and who own less than a 25% interest, will not be eligible for the PPR exemption under the transitional provisions and will be liable for land tax from the 2025 land tax year.

Required Documentation

When applying for the PPR exemption, applicants may need to provide supporting documents to demonstrate their continuous occupancy and residential use of the property. Acceptable documents include:

Electricity bills showing usage
Gas bills showing usage
Home and contents insurance policy

Council land rates and water rates are not acceptable forms of documentation as they don’t provide evidence of residency.

Implications and Recommendations

These changes are significant for property owners and potential buyers in NSW. It is essential for affected individuals to reassess their property ownership structures and consider adjusting their share to ensure they are not paying unnecessary tax.

For any husband/wife/domestic partner landowners who intend to transfer ownership interests in your PPR, it is worth considering whether you are eligible to land transfer duty (stamp duty) exemptions.

For more information on the principal place of residence exemption or other state taxes and to ensure compliance with the new rules, refer to the NSW State Revenue Office website https://www.revenue.nsw.gov.au/.

If you need advice from one our tax lawyers to help navigate these changes, please do not hesitate to contact us on 1300 907 335 or complete an online form.