Help!_How to reduce land tax?

[SomerForum]

Hi !

I wish I read the "FAQ: The dreaded Land Tax" and knew more about the state land tax before buying investment properties.

My husband and I jointly purchased a few properties in Sydney, NSW (that is, each of all the properties is under both of our names). However, we didn't know the Land Tax issue and now we are paying more than $10K land tax in cash each year as we work overseas now.

Our total salary income will be reduced next year. If we don't have to pay this $10k in cash each year, we could possibaly be ok. If we have to pay this $10k/y, we would be unable to keep them and have to sell to reduce the land tax. However, this would be extremely painful as the property price is not good in Sydney now, and we purchased 2 main properties 3 years ago when the prices were the highest. We would make a loss if we sell now.

Can we change half of the properties to his name and the other half to my name? If we could do so, will there be any other cost incurred? Is there any method could allow us keep the properties and reduce the overall cost (especially land tax)?

Grateful if anyone who is familiar in this area could help advise us - we really need some helpful advice on the matter.

Thanks a lot in advance !

Sally

 

[Les]

G'day Sally,

I haven't done this, but, since you asked, this is what I THINK would happen:-

To change titles would incur Stamp Duty for each changeover. And, as I don't buy in NSW, I have no idea re what this cost might be.

The only gain that I think might happen, is that the Stamp Duty is a one-off cost, whereas Land Tax is ongoing..... So it COULD be feasible - over time. But then, the cost to change each one over might be $10k, where the benefit might only be $1.5k ...... I don't know the numbers.

Hopefully someone from NSW can come in and give some meaningful figures. That way, you can then decide what is the best way for you to sidestep this problem.

And, welcome aboard - I hope the forum provides some worthwhile information for you,

Regards,

 

[SomerForum]

Hello Les,

Thank you so much for your prompt advice and your warm welcome!

You reply is very helpful and I have certainly learnt a lot from the postings at the forum.

Have a great week ahead.

Sally

 

[geoffw]

This may not be a lot of help.

But if you do decide to sell a property (say next year), ensure that it settles before December 31- preferably closer to that date.

The person who is holding the title for a property in NSW as at December 31 is liable for the land tax for the entire calendar year.

 

[handyandy]

Just an idea out of left field.

Get divorced and do a property settlement where you both end up with 1/2 the properties. May cost some legal expenses but there should be no stamp duty involved as it is a seperation issue.

Don't know about the CGT liability as whether a CGT event occurred.

Ones the whole thing pans out you can get married again and your problem is solved.

Cheers

PS I suggested this to my wife but she wouldn't go for it

 

[ggumpshots]

This may not be a lot of help.

But if you do decide to sell a property (say next year), ensure that it settles before December 31- preferably closer to that date.

The person who is holding the title for a property in NSW as at December 31 is liable for the land tax for the entire calendar year.

In qld the owner is reponsible as at Jume 30 BTW

 

[Bandita]

I'm not sure about NSW, but in VIC at least - I believe that it you transfer name of property between spouses, then NO stamp duty is payable - only Capital Gains Tax (which by the sounds of it you may not have?). Maybe be an option - I'd speak to an accountant though to make sure.

Cheers,
Jen

 

[Brenda Irwin]

Maybe the land tax won't be so bad in the future? If land values decrease and the thresholds are increased, then maybe it won't be so bad. Is land tax a deductable expense if the assets are earning income?

 

[Aceyducey]

Sally,

Have you spoken to a (GOOD) accountant about the situation?

There may be many things you can do - you just don't know what you don't know.

Cheers,

Aceyducey

 

[rich ando]

Is land tax a deductable expense

Maybe the land tax won't be so bad in the future? If land values decrease and the thresholds are increased, then maybe it won't be so bad. Is land tax a deductable expense if the assets are earning income?

yes Brenda land tax is deductable expense if the assets are earning income.

 

[kaf]

yes Brenda land tax is deductable expense if the assets are earning income.

Really? So it can't be deducted as an expense if you negative gear (I think) but you can if your property is positive? How does that work?

kaf

 

[rich ando]

land tax

Really? So it can't be deducted as an expense if you negative gear (I think) but you can if your property is positive? How does that work?

kaf

kaf

a property can be earning income and still be either negatively geared or positively geared (depending on the expenses including interest). Either way, if rent is coming in the land tax and other expenses are deductable.

R

 

[kaf]

kaf

a property can be earning income and still be either negatively geared or positively geared (depending on the expenses including interest). Either way, if rent is coming in the land tax and other expenses are deductable.

R

Ah, my confusion - thanks for clarifying! I didn't realise that land tax -being a tax- is tax deductible.

Cheers

kaf

 

[asdf]

I think HandyAndy's suggestion is the only way. I'm not sure if you actually need to file for divorce. Separation may be sufficient to get the transfer benefit. Check out the land titles site or call OSR.

BTW, NSW is the WORST state to be buying an investment property. There are numerous deceased or close to deceased estates up for sale now because income poor owners can't afford the exhorbitant land tax bills. I would never buy more than one IP here. PPOR is about the only avenue to make tax free money and its from the Commonwealth. NSW govt, you're a joke!

 

[Brenda Irwin]

Choose the most highly valued of all your blocks and live on it. That way a large portion of your land tax bill will be exempt as it is your residence.

 

[SomerForum]

Dear all

It's really heartening to receive all your helpful replies! Really appreciate it and I've learnt a lot.

May I have additional questions pl?

(1) Say if we could manage to transfer property 1 to my name, property 2 to my husband's name and keep property 3 under both our names - what would happen in this scenario? The NSW gov would still give one threshold to us, or would give one threshold to me and another to my husband?

Brenda:
(2) We have worked in Singapore for many years and are still working here. Guess this does not qualify us to choose the most highly valued of all blocks as residence and get land tax exempted right?

Aceyducey:
(3) We're using HR&Block in Sydney for our tax returns. The personnel handling our returns does not invest in IP and doesn't know much. Wondering if anyone knows and could recommend a good accountant in Sydney or Singapore...

Thanks very much to all again! While we shall seek professional help, we do treasure all you guys’ help… especially we are overseas and professional help is not always readily available.

Sally

 

[Diane]

We had the same problem some years ago in NSW and transferred half into each of our names (did not change the loans they stayed in joint names). This gave us two thresholds and almost wiped out our land tax bill. From memory there was no great fees involved as far as stamp duty for spouse transfer but we had to pay capital gains tax up to date. It was a worth while exercise and the only sting in the tail is when we sell we cannot split the capital gains tax.

 

[Les]

G'day Diane,

This gave us two thresholds and almost wiped out our land tax bill. From memory there was no great fees involved as far as stamp duty for spouse transfer but we had to pay capital gains tax up to date.

Diane, may I ask what this means (or meant) to you? Did the change of ownership trigger a "Capital Gains Tax Event" which meant you had to "square up" the CG in that FY?

If so, it might have worked beneficially in your case, but is not necessarily worth it to someone else (depending on the CG involved). Did you make a very low CG over the period? Or were Land Taxes that high?

I hope you can add more....

Regards,