Land Tax - a newbie asks ......

Discussion in 'Property Finance' started by Les, 9th Apr, 2005.

  1. Les

    Les Member

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    G'day all,

    I wasn't doing too good in getting help by posting this in another thread dealing with Land Tax, so figured I'd ask the question in a new thread.

    As one new to Land Tax, (and, yes, this IS a "self-inflicted wound" ;)), I am suddenly hit with a cost that was not evident over the last 5 years. And, from figures seen (recent OSR statements issued) I can be sure to pay three times more NEXT year. And even more for every year thereafter....

    Yes, true, my Nett Worth has been the beneficiary of the boom, but this growth is "paper money"!! Yet I'm expected to pay Land Tax with REAL money. And THREE times more NEXT YEAR even if I buy no more IP's. That's an extra $10k per annum !!!!! (Wonder what my tenants would think of a $40/week rental increase???) :eek:

    OK, it's a cost of doing business - guess I'd better learn to live with it. Better not be TOO many 0.25% rises too quick though.

    How does the "starting out" buy-and-holder cope with these? And the "five year crunch" is around now too (for me, at least with my first purchases), so borrowing costs have gone, depreciation deductions are slowing, Land Tax hits, RBA are "tapping the brakes", oil is rising, rents aren't rising quickly enough...... (I've got around the issue of "reverting to P&I" by refinancing, so no "crunch" there....)

    What is the way forward? Is selling an IP the only way out? Could a cashbond do it? Hmmmm. Is this simply a "slow down, dangerous curves ahead" road sign?

    I'm also bemused by the fact that Land Tax is dated as of 30 Jun of any given year. Why not 1 July, as the Tax seems to be apportioned in the NEW Fiscal year (I'd been dreading getting the "bad news" for a while, but, in the end, it seems they are NOT looking to impose it retrospectively after all.... Thank heaven for THAT!!)

    And, yes, as a property investor, I probably have little to complain about - but a bit of help re HOW to overcome this would be welcome.

    Listening,

    Regards,

    PS Dunno - but I suddenly see how this bl**dy Land Tax can be such a HUGE impost for those that DON'T have income from their properties. Those whose only sin is to buy and hold their own PPOR (e.g. in Sydney coastal suburb) and who might've long since retired, and are now being pummelled with tens of thousands of Land Tax $$'s

    To be fair, I really can't see that those of higher years should be so challenged simply because 50 years ago they bought in a location that has risen in value. There HAS to be a better way for a Govt. to raise funds, surely.
     
  2. Jacque

    Jacque Buyers Agent and Bookworm

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    Hi Les,

    You've missed so many posts on this touchy topic already. Do a search or two and settle in with a coffee or two, buddy :)
    We're nearly all mad about it and, as you rightly point out, it's a CASH payment due annually, which really hurts! It's small wonder NSW investment, in particular, has gone down the toilet. I believe next yr to be even worse, as the repercussions from all the late assessments (I'm still awaiting a few bills myself despite putting them all in end of last yr) will have a flow on effect and really damage investment activity in NSW. Carr is looking at some changes, but we all are kept guessing as to what they'll be.
    Oh, and don't forget that if you sell in NSW you'll also be up for that extra little 2.25% exit tax. Just a little extra to put into the NSW state coffers..... compliments of all us rich, fat, landlords :mad:
    Don't get me on my soapbox again...... !!
     
  3. Ebbie

    Ebbie Member

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    Or those whose only sin is to put/buy their PPOR (or IP's) into a trust and are unfairly taxed at more than triple the rate as an individual [for land under $400,000]. It is the same damn property!!! :mad: :mad: :mad:
     
  4. agent 86

    agent 86 Member

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    Les,

    Reverse Mortgages will increase.
    Noticed the CBA putting up signs in local branch yesterday......
    "ask us about Reverse Mortgages"

    A86
     
  5. geoffw

    geoffw Untitled

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    Have a look at this post and the SMH article it refers to
     
  6. Les

    Les Member

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    G'day Geoff,

    Thanks for the link. THIS amazed me:-
    Sheesh, and I thought I had it bad !! At least mine are all in Qld, where we still have a threshold, and NO exit Tax (yet?)

    Dunno how Carr gets away with this....

    Hehe, I reckon this Exit Tax should be renamed "FBT" - if this is not a "Farewell Bob Tax", I don't know what is.... ;)

    Regards,
     
  7. geoffw

    geoffw Untitled

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    The limit has been removed- but if your property is under the previous tax free threshold, the rate is something like .4%. HOWEVER, if you own the property under a trust, you are subject to the full 1.4% from $1.

    I suspect that the tax has hit a lot of people hard because they never registered for land tax, even if their properties were way over the tax free limit- now that everybody is getting taxed (apart from PPOR and rural) the government is able to find these people.
     
    Last edited: 11th Apr, 2005
  8. Macca

    Macca Member

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    Yes Footy,

    and when we think that the government has a record of all property owners in NSW, how hard would it have been to write a program to search a computer data base to show if a person owns more than one property.

    If they had collected all the land tax due to them under the previous legislation they may not have needed to upset so many small investors.

    The pollies are getting nervous, they did not realise how many people they were going to upset.....which just highlights how naive the government is.
     
  9. geoffw

    geoffw Untitled

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    I had some colleagues who worked on such a system many years ago in Victoria. They matched peoples' names with property details- and sent a tax bill to people with the same name and address who owned more than one property.

    Unfortunately for them, the then premier of Victoria had a son who shared the same name and address, and both owned properties. There were some not nice consequences for them.
     
  10. Olly

    Olly Member

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    Isn't your PPOR exempt?

    This from - http://www.osr.qld.gov.au/taxes/land/exempt_ded_ppr_natural.htm

    Exemptions or deductions
    Principal place of residence deduction – natural persons

    To be eligibile for this deduction on your principal residence, no form of business can be conducted on the land and no part must be rented, leased or let.

    Only one property can be claimed as your principal place of residence whether it is in Queensland or anywhere else. The deduction amount is the unimproved value on which the principal place of residence is located.

    This deduction is in addition to the statutory deduction. See the example under 'Rebates' on the left hand side.

    The deduction must be applied for in the first year and will then be automatically allowed for subsequent years. If you change your principal place of residence, it will be necessary to lodge a new claim form for the new principal place of residence. It will also be necessary to advise the OSR of any changes in use of the land (eg. the land is used for business purposes or rented) as at 30 June in a relevant year.

    To make a claim for this deduction or exemption, choose the appropriate form from ‘Forms’ on the right hand side.

    And the NSW OSR says something similar here - http://www.osr.nsw.gov.au/pls/portal/docs/page/downloads/other/landtax_factsheet_2005.pdf

    Olly
     
  11. geoffw

    geoffw Untitled

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  12. Les

    Les Member

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    Thanks, Geoff,

    Yeah, thought there was something like that
    Good to here that THAT one's gone - but the Govt are certainly making up for it, aren't they..

    What I DID hear on radio yesterday is about some little old lady whose hubby passed away in the recent past, and she moved elsewhere (old person's home?) and rented out her home.

    Now she faces a $12000 Land Tax..... And, as I noted, you can't pay Taxes with paper gains. So where does that leave her? Is she now forced to sell her former home, just to pay a Tax bill? Will she know enough to endeavour to seek finance (in HER day, Asset Based loans were probably not known, and neither were "loans to women" - how will she go??) I just really feel for people like this - she possibly doesn't have a clue how best to go.

    I hope she has the good sense to "check things out" before just selling up (which would probably be the LAST thing she wants to do to the "family home"....)

    Regards,
     
  13. Macca

    Macca Member

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    Take your point GW but if they had sent out registration forms to those who own more than one property and then done their assessment that would make sense.

    And another thing, my dear old mum got a letter about land tax, how many properties etc...did every one get one of those ?

    The postal bill would have been enormous.

    Just search and mail to those with multiple properties.....too easy !!
     
  14. geoffw

    geoffw Untitled

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    But how do you determine if John SMith, DOB 01 Jan 1977, who owns a house in Glebe, is the same John Smith, same DOB, who owns a house in Dubbo? That's even assuming the DOBs are known or accurate. It can be difficult- uniquely identifying a person is a big problem for many IT applications.
     
  15. Macca

    Macca Member

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    As I understand it Geoff, everyone in NSW not already registered for LT, got sent a form asking them if they own more than one piece of RE.

    Sure you are going to find some overlap of names but it is still more efficient to send out a form to all with same name and DOB shown as owning 2 props rather than mail to everyone in NSW at random.

    Lady in the paper complaining about land tax, she owns PPOR plus 5 other props, never registered.....GULP :eek: She would have shown up years ago with a simple search, same name 6 props.......
     
  16. XBenX

    XBenX Member

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    That letter must have skipped me....