Land tax shock!

[Hodge]

I just used the sro land tax calculator for Victoria. According to their calculator if you have land value of $1.6m, no trust, tax comes to $7775. Same land value in a trust makes the tax bill a bit over $13k.

Doesn't seem right to me?

 

[wategos]

Sounds like Queensland's got a few tax loopholes to close.

 

[Terry_w]

I just used the sro land tax calculator for Victoria. According to their calculator if you have land value of $1.6m, no trust, tax comes to $7775. Same land value in a trust makes the tax bill a bit over $13k.

Doesn't seem right to me?

The rates are higher for trusts in VIC, so it may be correct but not right!!

 

[bobby85]

Hey guys,

My accountant recently informed me of my potential land tax fees that I'll need to pay.
I've registered all my properties on the OSR website but I have yet to receive a bill.

Do you wait to receive one in the mail or are we supposed to go to the website and chase them to pay up?

 

[Paul@PFI]

There is a legit way to obtain multiple land tax thresholds but it is costly in itself and needs to be contemplated prior to acquisition for land rich investors. Best used where there is no/limited borrowing also.

Its often overlooked.

The issue is that of a trust AND use of a final investor that also receives a threshold. So if the land is owned by multiple trusts and each trust has a unique final owner its possible for multiple LT thresholds in some cases. That final owner cant be individuals in each case as the land value accumulates to the final owner. However if its a company or a SMSF etc then each entity can receive a separate threshold. If the final investor is individuals plus a SMSF its an example of a double dip. Then if you add a company... A third etc...Two companies its four.

Same strategy can also apply to SMSFs. It can be a useful strategy for a family SMSF that is buying a significant property (eg apartment block) to break the individual title ownership into separate trusts each with a separate SMSF yet just two members. There is no law which restricts a SMSF member to one SMSF. Mum and Dad can have four or even more SMSFs if they want. The land tax saving per split can up around $6k per annum. This saving has to be balanced with the extra costs for compliance. However in practice, compliance costs aren't multiplied.

The message in this post is that there are some highly advanced strategies available for land tax that depend on a multitude of factors.

 

[jrc]

Just bear in mind the related company provisions in Section 29 Land Tax Management Act


http://www.austlii.edu.au/au/legis/nsw/consol_act/ltma1956173/s29.html

 

[Paul@PFI]

Which is actually more expensive

Land is usually appreciating. Buildings are depreciating.

I would rather own a high land component in an appeciating area than a depreciating block of concrete with a QS report.

 

[Paul@PFI]

Just bear in mind the related company provisions in Section 29 Land Tax Management Act


http://www.austlii.edu.au/au/legis/nsw/consol_act/ltma1956173/s29.html

Easily overcome. A lame duck. Also thats just NSW.
How many companies have unidentified shareholders ??? Land tax has no identification requirements. Its so antiquated. I cant open a bank account without ID but no provisions exist for shares. If you chase me I just make the shareholder XYZ Pty Ltd. Its a joke. My name is Quing Dung Flung...Tomorrow its Joesph Chan. Next week its Frank Furt. My address is Lot 62 DP 564322. My real name ?

 

[Rixter]

Land is usually appreciating.

Correct 'Land' does not appreciate more than any other structure all the time. Its a generalisation. Land is purely the commodity being marketed, same as Villa's, Townhouses, Houses, Apartments, etc etc. It's the 'demand/supply' equation for a particular commodity that determines its value. Otherwise land out in Broken Hill would be the same value as land in Sydney's inner east. This is also why villa CG can out strip house CG in a set area.

Buildings are depreciating.

Thus the depreciation schedules to upkeep buildings & fixtures.

I would rather own a high land component in an appeciating area than a depreciating block of concrete with a QS report.

One's chosen investment strategy determines what is best for them to purchase.

 

[cadence]

I just assumed they hold the data and will automatically issue a notcie when the value goes over the threshold ... Good lesson learnt. In hindsight, I should have engaged a tax agent from the start.

 

[Terry_w]

I just assumed they hold the data and will automatically issue a notcie when the value goes over the threshold ... Good lesson learnt. In hindsight, I should have engaged a tax agent from the start.

Most tax agents wouldn't take on land tax issues - so check to seek if they can advise on this first. I just had a client who suffered a $4000 loss by incorrect advice from a tax agent.

 

[cadence]

Thanks Terryw ... great advice

I did try to work out my land value over the years ... the rates for house s were easy to decipher but I must have miscalculated the apartments ... a bit shocked to read from the assessment how much land value they attach to apartments ...

I suspect I will need to lodge amendment requests each of the prior years' NoAs to try to recover some money back? I can't just claim it all this year because I paid for it this year?

Thanks in advance.

 

[Paul@PFI]

Thanks Terryw ... great advice

I did try to work out my land value over the years ... the rates for house s were easy to decipher but I must have miscalculated the apartments ... a bit shocked to read from the assessment how much land value they attach to apartments ...

I suspect I will need to lodge amendment requests each of the prior years' NoAs to try to recover some money back? I can't just claim it all this year because I paid for it this year?

Thanks in advance.

Most accountants will tell you can. Unfortunately the ATO has a different view. http://law.ato.gov.au/atolaw/view.htm?docid="AID/AID2010192/00001" So yes you will need to amend. Any you cant claim adds to the cost base of course.

Before you jump to the conclusion you can only amend two years its worth seeking advice.

I do a lot of land tax work. It comes from a former position were OSR used our boardroom. I have to agree with Terry that some accts know little about land tax. Its just one of the skills a property savvy tax person should have.

Voluntary registration at the time of acquisition is my preferred strategy to avoid the issue of arrears. The old land tax clearance cert when you sell can trigger a debt too.

 

[sanj]

We have a big land tax bill due in a week for property held in a trust. It is a good lesson on getting appropriate advice on setting up how you should hold property. (This was not our doing, but an inherited situation.) We also have our own land tax to pay for our double block.

If we get approval to build townhouses on our double block, we will be putting each townhouse into a separate trust. The two houses will be left in hubby's name on much smaller blocks, and I've estimated that the land tax on the total might still be around what it is now.

With the trust, the options are to pay the stamp duty to transfer one or more houses into different names/trusts, which would only be worthwhile if we hold the properties long enough to recoup the expenses of doing so, or to suck it up and decide whether to sell something, buy something else in another entity, sell a property and buy shares instead, etc.

We have until 30 June 2015 (land tax is calculated on your holdings as at that date) to make a decision on whether we change things. If we do nothing, we get to pay it again next year. I really hurts to pay out so much. i know we are lucky to have the assets, but structured differently, we be so much better off.

My parents chose just one trust for several reasons that made sense at the time, but one of the reasons not to set up more than one trust was the extra cost to manage multiple trusts, cost to do the tax etc. I don't recall any advice back then about land tax being discussed and the option of having one property per trust. (Also, I guess the land value was much less back then, and as it rises, the land tax rises.)

So, when the likes of fullylucky ask questions and ignore the answers, it makes me annoyed. My parents took advice, and the advice was to have more than one trust. Choosing not to do so has proved to have been the wrong way to set things up, but at the time, land tax was not the impost it has become.

There is a lesson there for budding investors.

have you looked at the numbers carefully with that set up?

there will be stamp duty and probably cgt due when you transfer titles to another entity after creating the blocks and it will be even higher if you do it after construction. might take a fair few years to pay it off via land tax savings

 

[daniellee]

I got a quick question and appreciate the feedback.

I got a family trust set up in Victoria. Can I use the same trust to invest in other states and enjoy the land tax threshold in each state? I assume that each state only charges land tax based on total land value owned within the state. So properties in VIC will not be included in NSW land tax assessment.

Thanks.

 

[Terry_w]

I got a quick question and appreciate the feedback.

I got a family trust set up in Victoria. Can I use the same trust to invest in other states and enjoy the land tax threshold in each state? I assume that each state only charges land tax based on total land value owned within the state. So properties in VIC will not be included in NSW land tax assessment.

Thanks.

thats right.

 

[Rolf Latham]

My real name ?

Ham Burger ??


ta
rolf

 

[Moyston]

My real name ?

Starts with P..... ummmm Mr P Nis? no inferral intended...made me lauf..Mr Frank Furt...lol

 

[jrc]

thats right.

Bear in mind that you might need to pay stamp duty on the trust deed in each state the trust is operating

 

[Terry_w]

Bear in mind that you might need to pay stamp duty on the trust deed in each state the trust is operating

This is news to me.NSW duties act for example has duty on the execution of a trust where one or more parties is in NSW.