He means you don't pay CGT or stamp duty for a transfer from your own name to a trust IF you buy it in the trust to begin with.
Land Tax - Help!
- Thread starter jingo
- Start date
He means you don't pay CGT or stamp duty for a transfer from your own name to a trust IF you buy it in the trust to begin with.
To follow up on Mry's response, stamp duty and CGT events generally occur when you transfer ownership. If you buy a property in the name of a trust to start with, you pay stamp when you buy and that's it. If you buy it in your personal name, say, and then transfer it to your trust later on, you pay stamp when you buy it and CGT AND another lot of stamp when you transfer it.
Alex
Yes, since you're paying an accountant, you should reasonably expect them to be competent. However, it's not always the case. e.g. you pay an agent to sell your house and you'd think he/she would be competent, but that's not always the case. The same goes for financial planners, lawyers, mortgage brokers, etc. In many cases, they're just incompetent at certain aspects, but otherwise they are perfectly good professionals. e.g. a lawyer may be great at criminal law but a complete amateur at property law.
Accountants who only do, say, mum and dad, employment income and no investments type returns will not have much experience with trusts. I knew partners at accounting firms who didn't use trusts, probably because their specialty was audit and they didn't understand it. There's no professional requirement in any of the exams that require you to be competent in any particular aspect of taxation. I am a qualified accountant myself but I barely touched trusts during the exams and working at one of the Big 4 firms, though I am legally allowed to hang out my own shingle and do tax returns and accounts for people.
Unfortunately, unlike doctors, most accountants don't advertise their specialties.
Depending on your advisor is fine but given the variety of advisors out there how do you know if you've got one that is knowledgeable about solutions to your needs? An advisor may be giving you advice to the best of their knowledge if they suggest you just put everything in the higher earning partner's name. It may be that they don't have any idea what the benefits of a trust is because none of their clients have multiple IPs.
In practice, you just have to know enough to understand your advisor and how good he is. As always with this sort of thing, the more knowledge the better. Think about how much time you spend at work. Since we're looking to replace our jobs with investment income, I think it's worthwhile to spend some time (and brain cells) building up our knowledge. Depend on the wrong advisor at your peril.
Perhaps most importantly, the more you know the better your advisor can advise you. I know my mortgage broker can give me better service because I know what I want. It's much harder when you just go in and say 'I want a loan'. Since I know the basics about loans, when one thread discussed why you would use interest only for PPOR, I understood what the brokers were saying.
When I'm discussing tax since I have a certain opinion and know how to justify that opinion, it's easier for someone to prove me wrong and correct me. A person who says 'well, I don't want a trust because an uncle lost control of his and lost all his money' doesn't give an accountant much to work with. Would I want to spend hours explaining why my client won't lose control of the trust, when he won't pay me for those hours? Or would I just do what the client wants and keep everything in personal names, even though it might not be the best thing for them?
Alex
Thanks Alex,
Yes, transfering properties from personal names into a trust would really be a total waste of money in our situation. Thanks for the claification. I am still considering whether a trust is appropriate to our situation.
In light of the number of costs involved in transfering properties from personal names into a trust, I believe it is best to keep our current properties as they are (ie. in personal names). If we decide to set up a trust to place new purchases inside it we could either:
i) Sell the properties outside the trust to pay down the loans of the properties inside the trust, (Not ideal in my opinion) or:
ii) Draw up the equity from the properties outside the trust to "release" the properties inside the trust from a mortage. The success of this strategy would depend on the value of our properties held outside the trust. That way the properties outside of the trust could be negatively geared against our salaries, and the distribution from the positively geared properties within the trust could be distributed among our beneficiaries accordingly.
Please correct me if I'm wrong.
On the topic of needing to have a basic knowledge of one's financal requirements before seeing a professional, I believe this is sensible. We have had an unpleasant experience with a financial planner, and the reason we 'smelt a rat' was because we knew enough about our situation and the information he was telling us to understand that he wasn't looking after our best interests. Since going it alone we have done very well! (Doesn't mean I don't listen to advice, or I wouldn't be asking questions on this site).
Thanks again for your replies. The information is very helpful.
Regards Jingo.
Jingo,
I can sympathise with you. I tend to lose interest once it gets past the *party of the first part.............etc etc blah blah blah*..........
Much rather be reverse engineering a widget I think..........
Alex,
Why is it entirely necessary that one must educate oneself to completely understand this?
My expectation would be that if you're paying for some sort of service that you would least expect a degree of competency? Or is this not the case in the financial services sector?
'scuse the ignorance
regards
Nor
Hi Norwester,
Yes, there is such a lot learn. I am going to try to understand the basics though (and read what I can) to ensure that I can improve our situation, and do the best that I can with our investments. I guess the thing that keeps me motiviated to do the best that I can are:
i) To establish a good future for our daughter. ie. give her opportunities to have a good education, travel, and have a good start in life. I would hate her to think in years to come that we hadn't done the best we could just because we stopped learning!
ii) The fact that my partner and I work very hard and want to have something to show for it in years to come.
Anyway,
Just my thoughts.
Regards Jingo.
Celica, PPOR is exempt from land tax.
In regards to homework, and knowledge, I often tell my accountant what I want, rather than doing what he says. I think that is safer than been led blindly.
People are saying trusts are better for Land Tax reasons, than your personal name. My reading is that the free threshold for trusts is only 20k, were as the free threshold for personal name is 200k.
Am I reading it right? Do trusts have to pay Land tax on anything above 20k of Land Value?
Also I have seen people say that the SRO will contact you if you owe. I have not been contacted yet, and I believe you would have to back pay as mentioned above.
So do you wait to be contacted by SRO, or do you tell your accountant at tax time?
cheers
mono
In regards to homework, and knowledge, I often tell my accountant what I want, rather than doing what he says. I think that is safer than been led blindly.
People are saying trusts are better for Land Tax reasons, than your personal name. My reading is that the free threshold for trusts is only 20k, were as the free threshold for personal name is 200k.
Am I reading it right? Do trusts have to pay Land tax on anything above 20k of Land Value?
Also I have seen people say that the SRO will contact you if you owe. I have not been contacted yet, and I believe you would have to back pay as mentioned above.
So do you wait to be contacted by SRO, or do you tell your accountant at tax time?
cheers
mono
Hi Mono,
The onus is on you to contact the SRO and tell them about your land holding regardless whether the land is in your name or trust's.
I don't know if I remember correctly but the penalties are 20% p.a., compounded, from the day the land tax was due.
Hi,
I have just emailed my accountant again to clarify our land tax situation. He has urged me not to contact the SRO even though he knows we owe some money. I think I should contact them though as I understand it the onus is on us to contact them in the first instance. My accountant also says that the land tax payable is split between the owners of the property, and therefore we don't owe as much as I first estimated. Who is right?
Hi
From what my accountant tells me (and who knows if he knows what he's really talking about) the tax is tallied according to the value of the land you own as of midnight on the 31 December each year.
Monopoly
The dates and rules differ with each state.
For Vic purchase the date is Dec 31(?) and it is prorated between the owner and the buyer, so theoretically when you settled on the property you would have paid approx 1/12 of the previous owners land tax debt. You will need to pay for the following year.
I think it is the same pro-rating method in Queensland.
In WA, it is ONLY the owner as at 30 June who is liable for the land tax (ie no prorating as part of settlement.)
Crazy huh?!
It gets even more crazy when you look at how stamp duty, land transfer, mortgage stamp duties etc vary from state to state.
The dates and rules differ with each state.
For Vic purchase the date is Dec 31(?) and it is prorated between the owner and the buyer, so theoretically when you settled on the property you would have paid approx 1/12 of the previous owners land tax debt. You will need to pay for the following year.
I think it is the same pro-rating method in Queensland.
In WA, it is ONLY the owner as at 30 June who is liable for the land tax (ie no prorating as part of settlement.)
Crazy huh?!
It gets even more crazy when you look at how stamp duty, land transfer, mortgage stamp duties etc vary from state to state.
You do in NSW.
Hi all,
Just thought I would update you on my land tax liability. Against the advise of my accountant I contacted the State Revenue Office to find out about my land tax liability. According to their records this is the first year I will have to pay, and my liability will only be $516.00!!
(Yeah!! I thought it was going to be much higher!)A point of confusion for me was whether I needed to contact the State Revenue Office to let them know that I thought I needed to pay land tax, or whether they would contact me in the first instance. It seems that they will contact you. (In Victoria anyway). A bill will be sent to me within 3 weeks (and this was going to happen whether I contacted them or not!!). (So my accountant was right!)
Thanks to everyone for replying to the post.
Regards Jason.
Hi monoply,
Thats interesting. When I contacted the State Revenue Office over a month ago now the person I spoke to said my bill would arrive within a week or two. Still no bill!!! I'm not complaining, but find this an interesting situation to be in!
regards Jason.
