Land Tax Issues

[JohnandDesiree]

Hello,

My wife and I are embarking on our property investment journey and this is our first post. We have read several previous blogs and found them very useful.

We have just about determined our strategy and have set up a spreadsheet to model potential deals.

One thing that we have found is that most of the deal examples or analysis tools that you see around do not include a Land Tax component. Land Tax quite often breaks a potential deal by adding $3,400 to $4,000 costs per year to the deals that we are looking at in NSW. This means that we are not achieving positive cash flow for 8 - 10 years instead of 3 - 4/5

Does anyone know why most examples and analysis tools do not specifically address Land Tax. Any advice or comments will be greatly appreciated. Are we missing something?

Cheers

John and Desiree

 

[BV]

J&D
I guess it's because you only pay land tax if you go over the threshold of $356K
Many investors diversify their portfolio buying in more than 1 state
or buying units or Townhouses and as their land component is lower
it takes longer for land tax to kick in.
You will not buy all your IP's in 1 go anyway so you have time
to structure your portfolio in a way that works for you.
Good luck.

 

[JohnandDesiree]

Thanks BV, that makes sense.

We understand that if buying through a trust structure, there is no threshold for Land Tax, so it kicks in straight away.

As an aside, we've just realised that we have been estimating our tax benefits incorrectly and the deals are looking a lot better!

cheers

J&D

 

[BV]

J&D

I came across this article the other day.

Have a look at the calculations at the bottom of the page.

I think they are also overestimatings their before tax losses
probably due to Land tax, maintenance and depreciation.
Are you including depreciation in your calculations?

http://www.moneymanager.com.au/articles/2007/06/11/1181414207110.html


cheers

 

[JohnandDesiree]

Again.....many thanks BV, the article is very interesting.

We haven't included depreciation in the calcs because the properties we are looking at are generally quite old. I guess we are being conservative because any improvements will need to be depreciated.

On Friday we purchased Steve McKnight's Investment Detective which we have found to be excellent and has helped us to more acurately analyse potential deals.

cheers

J&D