HDT and land tax in Victoria

[Twitch]

I've got a couple of simple questions about HDTs and land tax in Victoria.

If I have an IP in my own name, and another in a HDT, are the 2 IP land values added together for the calculation of land tax, or are they treated separately?

Also, are the land tax rates and thresholds in Victoria the same for IPs within a HDT as for IPs in my own name?

[DaleGG]

Hi

No, they should not be added togather if the structure has been set up to shown a distinction between you and the trust.

So, you effectively get two bites of the cherry....

Dale

I've got a couple of simple questions about HDTs and land tax in Victoria.

If I have an IP in my own name, and another in a HDT, are the 2 IP land values added together for the calculation of land tax, or are they treated separately?

Also, are the land tax rates and thresholds in Victoria the same for IPs within a HDT as for IPs in my own name?

[Twitch]

Thanks Dale. That single factor must be a huge selling point for HDTs, because by my calculations it becomes quickly unaffordable to own even 4 IPs in Melbourne.

If I take a $400k land value per house (not unreasonable in Melbourne) then if I hold assets in my own name the yearly total land tax bill becomes
1 IP = $600
2 IPs = $2,630
3 IPs = $9,955 :(
4 IPs = $20,955 :eek:
5 IPs = $32,905 :eek: :eek:

However, having 2 in own name a 2 in trust means a land tax saving of about $15k per year ($20,955 - 2*2,630). So maybe the sweet spot in this example is 2 IPs / entity, as the cost of setting up a new structure (say $3k) is more than justified with a $15k land tax saving.

Have I misunderstood?

[DaleGG]

HI

No, you seem to understand one the issues with regards to using a HDT very well. As you will also have realised, too, is that these tax amounts are based on today's property values and we're going to see increases in land values over the next 10, 20, 30 or 40 years ....SO, the land tax problem will just get worse woith time, without some planning.

Dale

Thanks Dale. That single factor must be a huge selling point for HDTs, because by my calculations it becomes quickly unaffordable to own even 4 IPs in Melbourne.

If I take a $400k land value per house (not unreasonable in Melbourne) then if I hold assets in my own name the yearly total land tax bill becomes
1 IP = $600
2 IPs = $2,630
3 IPs = $9,955 :(
4 IPs = $20,955 :eek:
5 IPs = $32,905 :eek: :eek:

However, having 2 in own name a 2 in trust means a land tax saving of about $15k per year ($20,955 - 2*2,630). So maybe the sweet spot in this example is 2 IPs / entity, as the cost of setting up a new structure (say $3k) is more than justified with a $15k land tax saving.

Have I misunderstood?

[MPmelb]

All the talk in Victoria at the moment is about crippling land taxes of up to $70,000 per year (Capt. Snooze in Nunawading) sending businesses to the wall has got me worried about property investors (like me). (PPOR is land tax exept).

The Vic govt. has responded a bit by increasing the tax threshold from $150K to $175K (big deal I can hear you say!), and reducing rates from 5% currently to 3% by 2009.

Land tax liability is calculated on your total "site value" of all investment property - see valuations on your municipal rates notices.

In 2005, if your Victorian total site value is $300,000, your yearly land tax is $400. Other scenarios maybe:
$500,000 site values = $800 tax per year
$800,000 = $2630 tax per year
$1,000,000 = $5755 tax per year
$2M = $32,905 tax per year
$3M = $65,905 tax per year
$4M = $105,905 tax per year

Scary isn't it. This tax is dangerous and may send many investors broke. It is going to be a big issue for property investors and State governments now and in the future.

Fortunately for myself, I have been investing in 1-2 bedroom apartments with a land component of 1/4 the total value of the property. This strategy has been more from luck and finances than planning, so I have been fortunate. I presume commercial and home property investors must be getting charged significant land tax.

NSW & Vic are the heaviest in terms of Land tax. To find out your State's Land tax and what you will be paying, check out your State Revenue Office website and look under Land Tax calculator.

Be warned - You may be in for a shock. :eek:

[cutegirl]

Quick question,

Regarding to the land tax, is it valued based on the land only, or land and building ?? I've a property of $400,000 and the estimated land value is $175,000 ?? So, the tax will be based on $175k or $400k ??

[Jamie]

Quick question,

Regarding to the land tax, is it valued based on the land only, or land and building ?? I've a property of $400,000 and the estimated land value is $175,000 ?? So, the tax will be based on $175k or $400k ??

Land tax is levied on the land value only - for now, anyway :rolleyes:

Jamie.

[geoffw]

Regarding to the land tax, is it valued based on the land only, or land and building ?? It is on land only. You may be confsued with Land and Buildings Tax :D

[cutegirl]

Thank's guys,

How do we calculate the value of the land ??
I try to use the calculator below:

http://www.sro.vic.gov.au/sro/srowebsite.nsf/lt/BD0CAB384949D05FCA256FC3001BDCDA?EditDocument&#calc

or

http://www.sro.vic.gov.au/sro/srowebsite.nsf/landtax

it is confusing me, because the site value is less than the unimproved value. What it means by the site value ? Is that land and buliding value OR land value only ??

My personal opinion the site value is the value of the land & building. But, why the unimproved value is greater than the land ??

Confused :confused:

[Grreg]

There is a tricky twist in the way the Vic. valuer generals office values your land. They value your land as though it is being used at its highest possible use.

So a caravan park may be paying $80,000 in tax because the site is suitable for a large hotel or multiple luxury beachfront townhouses. Similarily a vacant piece of inner city land may be taxed as though a multi-level office building was built on it.

Or the local pub might have a 50 space car park on its land. This could be converted into shops or apartments and the pub owners will be taxed as though it already is. Pretty unfair and one that will increasingly catch out residential property owners as the government pushes for higher dwelling densities as part of Melb 2030.

Hope that makes sense.
Greg

[Les]

Pretty unfair and one that will increasingly catch out residential property owners

Sheesh - remind me to NEVER invest in Vic !!!!! :eek:

Regards,