FAQ: The dreaded Land Tax

Discussion in 'Accounting and Tax' started by always_learning, 6th Jun, 2003.

  1. always_learning

    always_learning Member

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    Example FAQ - The dreaded Land Tax

    Land Tax - a Tax on the Rich?

    Information
    In all states ( except NT) of Australia there is a tax applied on the total unimproved value all land owned in that state. First introduced as a tax on the rich, due to rapid increases in property prices and the land they sit this tax is now become mainstream...not that any state governments Liberal or Labor are complaining about the extra income land tax is generating.

    Many feel that land tax is an unfair tax on those who choose property as an investment vehicle, no tax is charged for those owning shares for example.

    What is unimproved land value: ie. in simple terms it is there (state revenue office) estimate of the value of your total land holdings without buildings (improvements).

    Example: Lets say you personally own 3 investment properties and your personal private place of residence all in Victoria, ie total 4 properties, total value of those properties is $1.680Million dollars, ie the land itself (not the improvements, ie the houses/apartments etc) is worth $1.080 Million.
    Next year you will get an account from your state revenue office (or you may have to tell them you probably owe them money). In the case of Victoria then your $1.080 Million of land will be taxed for $7,630 (will that be a cheque or cash?). Note that if you owned $1.080Million of NAB shares you wouldnt have to pay a cent of company ownership taxes.


    How to Avoid or Minimize Land Tax

    • Own properties in multiple states, remember tax is applied to the total value in that state. Buy one property in NSW, VIC, TAS, ACT, QLD, WA, SA.
    • Buy in NT, no land tax in NT.
    • In some states buying individual properties in different trusts could limit the impact. For example in Victoria and QLD the first $150K is of land value is not taxed in a Trust but in NSW properties held in trusts are taxed from the first $1 of value.
    • Buy some in your name and one in your spouse’s name.
    • Buy overseas such as New Zealand where land tax does not exist (yet?).


    Tax Scale Information
    • Land Tax Victoria
      [​IMG]
    • Land Tax SA
      Up to $50, 000 Nil
      $50,001 - $300,000 35 cents for each $100 or part $100 over $50,000
      $300,001 - $1,000,000 $875 plus $1.65 for each $100 or part $100 over $300,000
      $1,000,001 and over $12,425 plus $3.70 for each $100 or part $100 over $1,000,000
    • Land Tax: WA

      0 50,000 Nil
      50, 000 100,000 $75.00 plus 0.15 cent for each $1 in excess of $50,000
      100,000 190,000 $150.00 plus 0.25 cent for each $1 in excess of $100,000
      190,000 325,000 $375.00 plus 0.45 cent for each $1 in excess of $190,000
      325,000 550,000 $982.50 plus 0.80 cent for each $1 in excess of $325,000
      550,000 850,000 $2,782.50 plus 1.20 cents for each $1 in excess of $550,000
      850,000 1,250,000 $6,382.50 plus 1.60 cents for each $1 in excess of $850,000
      1,250,000 2,000,000 $12,782.50 plus 2.00 cents for each $1 in excess of $1,250,000
      2,000,000 5,000,000 $27,782.50 + 2.30 cents for each $1 in excess of $2,000,000
      5,000,000 $96,782.50 + 2.50 cents for each $1 in excess of $5,000, 000
    • Land Tax: NSW
      ]
    • Land Tax: ACT
    • Land Tax: QLD

    Related Forum Threads

    External Links, Books and Resources

     
    Last edited: 6th Jun, 2003
    duncan_m likes this.
  2. always_learning

    always_learning Member

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    Above is an example FAQ type posting.
    As per this thread I would like to suggest that a separate sub-forum for FAQ's be created for such postings. It is also my proposal that a many of people can edit each FAQ to add or change information.
    As per above my master work...is in need of improvement
     
  3. beech

    beech Member

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    good work AL i like it.


    Darren
     
  4. Sunstone

    Sunstone Member

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    Dear AL,

    I echo Beech's sentiments. Nice setup. Keep pushing Sim in a friendly and helpful way and I am sure you/we can make it happen.

    It would be a benefit to all on the forum.

    Cheers,

    Sunstone.
     
  5. Macca

    Macca Member

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    Yep!!!

    Good idea and a good example, well done.

    I think we definitely need a FAQ section, all the good sites have one don't they ? :D

    I would suggest it should be somewhere near the top so that newbies can find it with ease or perhaps it should be prominently displayed when a new user registers.

    Maybe when the newbie registers they should get a screen saying, "welcome to the somersoft forum, please go to our FAQ section before posting any questions" and provide them with a link "FAQ"

    This would stop the same simple questions being asked every fortnight, yes, out of courtesy someone usually answers, but it does clog up the system when the forum is busy, don't you think?
     
  6. Rickardo

    Rickardo Member

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    Nice work AL,

    An FAQ forum/page like this would be great, we could all use it as a reference as needed and it's a good starting point for learning some new info.
     
  7. Kitkat

    Kitkat Member

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    well done, I found this post very informative and worthwhile and definitely one that needs to be easily found again
     
  8. Gill Bates

    Gill Bates Member

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    Land tax is a outdated tax.

    Its original purpose was to discourage people from holding large amounts of (? suburban ?) land and just waiting for the value to increase.

    From Australian Tax History
    http://www.ato.gov.au/content.asp?doc=/content/Corporate/tax_history.htm

    <snip>
    In 1910 a land tax was introduced by the Commonwealth Government to provide for the defence of the nation and to prepare for a major increase in migration. The land tax was also introduced to encourage large landholders to subdivide their land and sell it to settlers. Many large landholders were wealthy Englishmen who would rarely visit or use their land. Introducing a land tax encouraged them to sell to settlers who would use the land productively.
    <snip>

    Government must love it - extra land tax dollars with the real estate boom for now and the future.
    My land tax bill has went from 0 to 7500 in three years.
     
  9. vh2000

    vh2000 Member

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    ACT is the worst. Land tax is applied even for the 1st IP.

    I inspected a nice 4 br house last weekend. Asking price : $620K . Unimprovement land value : $510K . Land tax : $5K

    Regards

    Huey
     
  10. luckyone

    luckyone 2 down 8 to go.

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    These are the land tax rates for ACT:-

    Land Tax Marginal Rates for 2005-06
    The land tax marginal rates that will apply to residential properties in 2005-06 are as follows:

    AUV up to $75,000
    0.60%

    AUV from $75,001 to $150,000
    0.89%

    AUV from $150,001 to $275,000
    1.15%

    AUV of $275,001 and above
    1.40%


    The land tax marginal rates that will apply to commercial properties in 2005-06 are as follows:

    AUV up to $150,000
    0.89%

    AUV from $150,001 to $275,000
    1.25%

    AUV of $275,001 and above
    1.59%
     
  11. Bushy

    Bushy Member

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    The latest Land Tax rates for 05/06 in SA

    up to 110k nil
    110k to 350k .3%
    350k to550k .7%
    550k to 750k 1.65%
    750k to 1 mil 2.4%
    over 1 mil 3.7%

    Regards Bushy
     
  12. murrald

    murrald Member

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    Vic Land Tax

    Total Taxable Value Tax rates
    $0 – $199,999 Nil

    $200,000 – $539,999 $200 plus 0.2 cent for every $1 of the value that exceeds $200,000

    $540,000 – $899,999 $880 plus 0.5 cent for every $1 of the value that exceeds $540,000

    $900,000 – $1,189,999 $2,680 plus 1 cent for every $1 of the value that exceeds $900,000

    $1,190,000 – $1,619,999 $5,580 plus 1.5 cents for every $1 of the value that exceeds $1,190,000

    $1,620,000 – $2,699,999 $12,030 plus 2.25 cents for every $1 of the value that exceeds $1,620,000

    $2,700,000 and over $36,330 plus 3.5 cents for every $1 of the value that exceeds $2,700,000



    I am currently at the 2.25% level.If I were to buy another property in Vic with a land value of say $400k we would have to pay $9k EVERY YEAR !.It nearly wipes out the entire rental return.Without some change to this tax the assets that I purchase in the future will be shares rather than property.


    Murrald
     
  13. farone

    farone Member

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    Have you considered putting each property into its own trust to keep each properties land tax below the threshold or just over the threshold?
     
  14. nonrecourse

    nonrecourse Banned

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    Land Tax is theft by stealth

    The Victorian government in its never ending quest to squeeze every bit of revenue out of landlords has increased the level of tax on property held in a trust to obscene levels. The reason why shares are not taxed in a similar fashion is because of portability. Companies can and have moved offshore when state and federal taxes make them uncompetitive.

    The solution is a nation wide tax revolt by investors on usurous land tax rates. Impossible you say? There was a similar tax revolt by property owners in California in the 1980's which resulted in three consectutive state government terms being curtailed as they felt the lash of an irate electorate.

    When you receive your annual rates notice, in the year that your land has been valued you should lodge an appeal you only have a six week time frame to do this in and then you are stuck with that valuation untill the next one which is every two years in Victoria.The council unimproved valuation determines the amount of land tax you will be levied in the subsequent years. If tens of thousands of small property owners did this every year it would make a significant impact on state and council resources and send a powerful message that investors are onto their game.

    The way land values have been calculated and the methodology has been dishonestly altered by all state governments who cynically have taken advantage of a small group of investors who they view as powerless because of the small numbers when compared with the total voter population.

    The Victorian government as Robin Hood outlawed the practice of passing single land tax holding rates onto commercial tennants unless the tennant is a publically listed company or I think is renting an industrial site over a certain size.

    The end result of this financially illiterate government folly is that at the end of a lease agreement thousands of businesses will have to move or fold because of rent increases of 50% and more. It is a sleeping time bomb waiting to happen.

    The current domestic rental crisis in Victoria is only the tip of the iceberg as serious landlords who hold investments in trusts are slugged by highway bandits dressed up as state politicians. No matter which side you vote for you need to make your views clear to all political parties that when you make a new lease out that you are informing your tennant that state government policies are the direct result of crown greed.
     
  15. Georges

    Georges Member

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    Hi,

    does this land tax apply to individuals too??

    I know it applies to Hybrid Trust.

    How about Unit Trust? Can we escape by holding it in Unit Trust????
     
  16. MattR

    MattR Member

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    Yes it applies to individuals but it all depends on who and how the land is held.

    Unit Trusts in Vic and NSW (at least) used to be entitled to the threshold before land tax applied. This was changed by a court decision in favour of the Vic state government. NSW promptly jumped on board for land held as at 31 Dec 05 , although they then deferred it till 31/12/06!!!!

    In NSW if the Unit Trust is deemed as "family unit trust" or some such and the land value is less then $1M then the threshold concession still applies. If not, then land tax applies in NSW from the first dollar!!!!!!

    For some Unit Trusts in NSW that has meant in one year an increase in land Tax of $5,984 p.a. !!!!!:eek: !!!!! Try passing that on to your tennant.
     
  17. Ray Brown

    Ray Brown Member

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    Hi all,

    could someone please tell me I have made a miscalculation and that after recently buying a $350K block of land taking all my 4 QLD properties unimproved land values (ULV's) above only $600K - I AM NOW LIABLE FOR ^&*(^% ....:mad: LAND TAX and MY PPOR IS NOT EXEMPT?!?!


    :eek:
     
  18. Les

    Les Member

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    G'day Ray,

    I don't know what you've seen Ray - but your PPOR IS exempt. Re the ^&*(^% .... LAND TAX - hmm, I dunno - maybe you've exceeded the limit for this State... Hard to know as my computer doesn't quantify ^&*(^% real well :p

    Regards,
     
  19. lev_lafayette

    lev_lafayette Lawful Good Anarchist

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    A different point of view

    From some perspectives land tax is the best and should be the only (or nearly only, "sin taxes" included perhaps) tax as it encourages more investment in productive capital (e.g., housing) or productive labour (e.g., services etc) rather than unproductive activity ("sitting" on an empty bloc). Land values increase because of other people's action, so in a sense deriving income from increases in unimproved land value is unjustified. It is very popular among economists for example across the political spectrum.

    Unlike any other tax it cannot be passed on to the consumer because the supply is already (relatively) fixed. Further, a low rate of land tax encourage monopolistic speculation, leading to higher land prices. High rates of land tax reduce the price of land. It is rather unique in that sense; tax a chair and the price goes up, tax land and the price goes down.

    Ultimately any investor has to decide whether they want an economy of goods and services or empty land.

    For further information:

    http://www.taxreform.com.au
     
  20. nonrecourse

    nonrecourse Banned

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    Fairy's at the bottom of the garden

    Here we go again yet another Robin Hood group that will solve the masses problems by stealing from those nasty rich landlords and distributing it to the poor. :rolleyes: