Land Tax Rebate:
Property Operators and Developers
The purpose of this Guideline is to provide an explanation of what constitutes a principal business
of property operation and/or development for the purposes of the Land Tax Rebate and outline
what evidence is required to support a claim for the Rebate.
Land Tax Rebate
The Land Tax Rebate in relation to total assessed taxable land holdings of greater than $350 000,
is only available to land owners who can demonstrate that their principal business activity is linked
A land owner who is in the principal business of property operation and/or development is entitled
to the land tax rebate for all land that is associated with that business activity. As a condition of the
rebate, these land owners will be required to provide evidence that they operate a property
operation and/or development business, and sign a statutory declaration that each parcel of land
for which they are claiming the rebate is related to this business. These land owners will not be
required to gain any further evidence from the tenants of any property they hold.
Am I in the Business of Property and Operation and/or Development?
In order to demonstrate that land owners are undertaking a property operation and/or development
business as their principal business, land owners will need to provide evidence that:
their principal income earning activity includes either:
leasing of residential, commercial or industrial property; and/or
subdivision or land development; and
these activities are undertaken in a business like manner.
A land owner who is in the business of property operation and/or development may also undertake
other activities. However, if these other activities are the principal income earning activity of a land
owner, they are not in the business of property operation and/or development.
Land owners who are not in the principal business of property operation and/or development may
still be eligible for the land tax rebate for their other activities, however will need to follow a different
application process. See Land Tax Rebate Guideline and Application for the Land Tax Rebate.
Note: This guideline has been adapted from the Australian Taxation Office’s public information
‘Carrying on a business of share trading’.
Residential Property Owners
Residential property owners are most likely ineligible for the Land Tax rebate, even if they receive
rent from that property, except where land owners can demonstrate that their principal activity is a
property operation and/or development business.
Factors that will be considered by the Commissioner in determining
whether a land owner undertakes a business of property operation
For the purposes of the Land Tax Rebate, the question of whether a person is in the business of a
property operation and/or or development will be determined on a case by case basis. The
Commissioner will consider:
the extent to which the land owner is engaged in the activity and whether this is a full time
commitment or a ‘side line’;
the profit making nature of the activities;
the repetition, volume and regularity of the activities, and the similarity to other businesses in
the keeping of:
books of accounts,
records of properties leases and rents,
planning survey or staging plan,
dedicated business premises,
licences or qualifications, and
a registered business name and an Australian Business Number;
the volume or scale of operations and activities; and
the amount of capital invested.
Nature of activity and purpose of profit making
The intention to make a profit is not, on its own, sufficient to establish that a business is being
carried on. Nevertheless, there must be an intention, and a prospect, of making a profit.
A property developer or operator carries out business activities for the purpose of earning
the carrying out of improvements on the land for the purpose of enabling the land to be sold
or leased; or
the advertising of the land as being for sale or lease; or
the sale or lease of the land.
You must consider not only your intention to make a profit, but also the facts of your situation. This
would include details of how the activity is carried out, or a business plan of how your activities will
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A business plan might show, for example:
an analysis of each potential investment;
analysis of the current market and various segments of the market;
research to show when or where a profit may arise; and/or
the basis of decisions by you as to when to hold, sell or improve your properties.
Repetition is a significant characteristic of business activities. Repetition refers to the frequency of
transactions or the number of similar transactions. A person in the business of property operation
and/or development will have records of property purchases and sales, developments and sub
divisions. Their portfolio of properties will be characterised by scale, either in number of properties
or value of land, and by turnover.
Organisation in a business-like manner and the keeping of records
A property operator and/or developer is likely to, but may not necessarily, operate under a
business name and keep records of agreements with tenants, business plans/cases for property
developments, significant investment of capital.
If records of purchases, sales, developments, rents and leases are not kept, it would be more
difficult for a land owner to establish that a principal business of property operation and/or
development was being carried on.
Scale of activities
The higher the amount of capital invested, properties owned, turnover of properties, or number of
development applications, the more likely it is that you will be assessed to be carrying on a
business for the purposes of the Land Tax Rebate.
Amount of capital injected
The amount of capital that you invest in buying properties is an indicator, rather than determining
factor, of whether you are in the business of property operation and/or development.
The SRO acknowledges that immature businesses may not have established significant assets on
their balance sheets, and may have a greater burden of proof that they are actively undertaking
principal business activities as a property developer.
Conversely, you may also invest a substantial amount of capital and not be considered to be a
property operator or developer for the purposes of the Land Tax Rebate if it is not your principal
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The difference between a property operator/developer business and a
The way in which income and expenditure are dealt with in relation to property varies depending on
whether you are in the property operation/development business, or you have merely invested in
The Commissioner will consider each case on its merits but, in summary, a property
operator/developer is a person who carries out business activities for the purpose of earning
income from buying, selling, developing, renting and leasing property. Their activity will be
characterised by the following:
receipts from the property sales, rents and leases may constitute income rather than capital
purchased properties may be regarded as trading stock;
the nature, regularity, volume and repetition of the property activity is consistent with those of
a property operator/development business;
costs incurred in buying or selling properties may be an allowable deduction for income tax
purposes in the year in which they are incurred; and
profits from property sales and improvements and other similar receipts may be included in
assessable income for income tax purposes.
A property investor is a person who holds property for the purpose of long term capital gain or
earning income from rents and lease receipts. This person's position may be briefly summarised
the cost of purchase of properties is not an allowable deduction for income tax purposes, but
is a capital cost;
profit from the sale of properties is not treated as revenue, however is taxed as a capital
a net loss from the sale of properties may not be offset against income from other sources,
but may be carried forward to offset against future capital gains made from the sale of
costs incurred in buying or selling properties are not an allowable deduction in the year in
which they are incurred, but are taken into account in determining the amount of any capital
gain or loss;
rent and lease receipts are included in assessable income; and
costs (such as interest on borrowed money) incurred in owning property income are an
allowable deduction at the time they are incurred.
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Property investors – Ineligible
Mary is employed full time job as a veterinarian but will shortly be retiring. She owns five rental
properties from which she derives income. She is not registered as a business for the purposes of
property rental, however, all income is assessed in her annual tax return.
Based solely on the information above it is unlikely that the Commissioner would determine that
Mary was in the principal business of property operation.
John and his wife own two investment properties from which they collect rent. They do not employ
an agent to manage their properties. They purchased these properties in 2002.
Based solely on the information above, John and his wife would not be eligible for the Land Tax
Rebate as there are no evident business characteristics of active property operation or
Joe is employed full time as an electrician. He owns two vacant pieces of land from which he
derives no income. Joe intends to build a town house on one block and intends to sell the other
block in the future.
Based solely on the information above it is unlikely that the Commissioner would determine that
Joe was in the business of property operation. The ownership of the property is not his principal
business activity; Joe is merely speculating on a valuation increase on one of his blocks and
intending to be a residential landlord on the other, neither of which constitute his principal business
Commercial property operators - eligible
Good Properties Pty Ltd is a jointly owned company that holds a portfolio of sixteen commercial
properties. They include warehouses, retail shop fronts and an office complex. Two of the
properties were untenanted at 1 July 2009, but these lease opportunities had been advertised. The
company operates from one of the sites in the office complex.
Good Properties Pty Ltd would be eligible for the Land Tax Rebate. Evidence would be required to
support their claim. All properties would attract the Land Tax Rebate. Good Properties Pty Ltd
would not be required to gather further evidence from its tenants.
Residential property operators – eligible
Two gentlemen have formed a business partnership. They buy and rent residential properties; their
property holdings do not turn over, but have been steadily increasing over the past few years. They
now operate more than 23 residential properties, many of which have been converted to studios or
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flats. The partnership targets their advertisements at the student market and have a well developed
business plan to support this strategy. One of the partners holds real estate accreditation and
spends most of his time on property acquisition, the other coordinates the property and tenant
Based on the information above, this partnership would be eligible for the Land Tax Rebate.
Evidence would be required to support their claim.
Diversified property business of commercial and residential, operator and
Peter considers himself to be a property developer but in reality has a mix of commercial and
residential property as part of the land holdings owned by his business
Because of the diverse nature of his business, he has experienced difficulty providing standard
evidence in relation to all the individual properties that he owns. He has advised that some
properties have yet to be developed, some are under construction, some are tenanted by
businesses and some are rented for residential purposes.
Peter explained in his application that he purchases land and develops the land to the specific
needs of pre contracted tenants. He also purchases land in areas where he is confident that sub
divisions would be approved within the next 36 months and would constitute a viable business
opportunity. He holds three residential properties in Launceston that he has improved as student
residences and he outsources the daily management of the properties. He is currently developing
the business case for a fourth student residence.
Based on the description of his business that Peter supplied in his application form, prima facie
Peter would appear to be classified as a property developer and would be asked to supply
Enquiries: By Correspondence:
Telephone: (03) 6233 8070 If you are a Tas subscriber The Commissioner of State Revenue,
outside the 62 area call 1800 001 388 State Revenue Office
Facsimile: (03) 6233 8548 GPO Box 1374, HOBART Tas 7001
Internet: www.sro.tas.gov.au In Person: 3rd Floor, 80 Elizabeth Street, Hobart
18 Jan 2010
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