Land Tax Solutions?

[Nominees]

I was just curious to find out if other people have found solutions to minimise their land tax.

Most of our properties are held in NSW and so we were up for a big land tax bill this year. The only solution I know of is to stop buying in NSW and start buying in other states.

I know that QLD will allow a threshold for trusts (unlike NSW) (the trick being starting up a new trust whenever a trust is starting to reach its threshold.), but what about the other states?

- WA
- SA
- NT
- ACT


Actually, what is the threshold exactly for QLD?

thanks,

Nom

 

[geoffw]

In the ACT, any property which is rented out is liable for land tax.

That may be partially offset by the fact that, being leasehold, 100% of the Stamp Duty is claimable for an IP in the year of expenditure.

I'm not sure about how trusts fare.

You didn't mention Vic- I'd be interested to know how things fare there for land tax & trusts.

 

[Brenda Irwin]

www.osr.qld.gov.au is the website for land tax in Qld.

For trusts or companies, the threshold is $170,000.

For individuals, a land tax bill will not be issued for values up to $275,997.

 

[Nominees]

You didn't mention Vic

Oops!, just forgot.

I am just trying to figure out which state is the best to invest in.


Brenda,

Thanks for the link, managed to find some good information quickly.

Just wondering, is the value of the land (as assessed by the QLD gvmt) about the same as the "market" value or is it lower?

In NSW the state valuation is about 50% less than the "market" price. (I am glad about that otherwise I would have had to pay nearly twice as much tax. Ouch!)

Thanks,

nom

 

[Nominees]

OK I just got some more information from the NSW OSR.

The important date for assessing land tax is the settlement date, however if you put a clause in your contract stipulating that the buyers can take early possession of the property (i.e. before the 31th of Dec of any year) you "may" be able to get an exemption.

Also "UNIT" trust's are allowed the threshold. Or more exactly the unit holders are allowed the threshold if they are private individuals, in proportion to the units held. (This might be worth looking into ...)

Thirdly, you can call the NSW OSR and ask them to pay installements over 6 months instead of 3. (which may help in some cases.) (Don't all call the same day though!)

Cheers,

nom

 

[Rixter]

The way I minimise my land taxes is to buy IP"S until they bring me up to the tax free threshold of that particular state, then I move onto another state and do the same there.

Other major advantages of doing it this way -

1/ minimises my over exposure risks to one particular area by the diversification and spreading my eggs (so to speak) into other marketplaces.

2/ Income tax deductions for associated interstate travel costs to inspect properties annually.

Hope this helps you

 

[simonjulie]

Hi All
We can limit L/T in the short term by using some of the above strategies. But if we are in this game for the long term I believe it would be a better idea to focus more on offsetting these costs against incomes for tax consessions when we are making money from portfolio growth.
Kind regards
Simon

 

[Nominees]

Rixter,

That is what I am thinking about. I am going to look into the threshold for each state... I was hoping that other people would give me the info so I didn't have to google my way to it.

Cheers,
nom

 

[ferretter]

In WA the taxable value is also about 50% less than current market value.

$50000 is exempt.
50,000 - 190,000 $75.00 plus 0.15 cent for each $1 in excess of $50,000
190,000 - 550,000 $285.00 plus 0.45 cent for each $1 in excess of $190,000
550,000 - 2,000,000 $1,905.00 plus 1.76 cents for each $1 in excess of $550,000

We also pay a Metropolitan Region Improvement tax of 0.15 cent for every dollar of the taxable value in the metro area.

Cheers ferretter

 

[Nominees]

Thanks feretter,

Actually these numbers look pretty good. I guess the key is to buy outside of Perth if I understand correctly.
I have been thinking about Mandurah and Rockingham as potential areas. Perhaps even Busselton or Margret River. Any thoughts on these location?

Do you know if these thresholds apply for truts as well?

thanks,

Nom

 

[Rixter]

Thanks feretter,

Actually these numbers look pretty good. I guess the key is to buy outside of Perth if I understand correctly.
I have been thinking about Mandurah and Rockingham as potential areas. Perhaps even Busselton or Margret River. Any thoughts on these location?

Do you know if these thresholds apply for truts as well?

thanks,

Nom

Nom, Deciding whether to buy outside of Perth really depends on your chosen investing strategy ie CG, Rental Yield , or a mix of both. True long term wealth comes from CG. If your looking for CG then Id try and stick to investing in the inner metro area as this is where the maximum population densities can be found, thus greater demand and we all know that when demand exceeds the supply thats what pushes the prices up.

You can find answers to your questions here in the Perth market at the following link - http://www.dtf.wa.gov.au/cms/osr_content.asp?ID=174

Hope this has been of help to you an others.

 

[Nominees]

Hi Rixter,

Thanks for the link.

You are right. CG is more important to me than yield (that is why I have a land tax problem!!) . But saying that one should always invest in inner metro areas to get good CG is not necesseraliy true, even though it more certain than "regional" areas. However the areas I was mentioning were along the "coast"... For me that is where the greatest CG will be over the next 10 years (anywhere in Australia, except perhaps the southen coast).

You mentioned in one of your earlier posts that you invest in every state up to the threshold limit. Rather than reinveing the wheel do you mind letting us in on the "better" states?

As far as I can tell it is QLD...

And once you reach the limit for each state, what do you do? (i.e. do you stop investing in property or do you make sure you start a project in January and finish it before December te 31st? or do you have multiple trusts etc...)

cheers,

nom

 

[ferretter]

Hi Nom,

Mandurah and Rockingham do have cheaper houses, more positive cash flow and heaps of properties for sale to choose from (though the canal estates are expensive in Mandurah). Cheap houses in this recent boom went from $90,000 to $150,000.
Rockingham start from $160,000.

Busselton and Margaret river are beautiful places, not sure of the rental market, nice places to retire though. Maybe someone else has more info.

The info on land tax was from the current brochure with no mention of trusts.

Cheers ferretter

 

[Rixter]

Nom, No Probs. You can access the various state Real Estate performances & data from the following link - http://www.reia.com.au/

Also state population growths/densities and other demographic statistics can also be found here as part of your due diligence processes -

http://www.abs.gov.au/

http://www.alga.asn.au/links/councils.php

Sorry but you are correct in saying inner metro is not the only area in relation to CG but I did ommit to mention that it minimises your risks.

Tip BTW - SE QLD is the fastest growing area

Hope this helps you & others

 

[Nominees]

Rixter,

Thanks for the links.

nom