Land tax threshold question

[cceasy]

Hi all,

Please excuse my noob question but when they say the land tax threshold for 2015 is $432,000 with rates $100 plus 1.6% up to the premium threshold... What does that mean? Does that mean that if I buy multiple properties and the land value is under 432k I don't have to pay a cent or I'm calculated at 1.6%?

 

[cceasy]

I think I figured it out... haha sorry for the noob question...

 

[Terry_w]

Nope. all properties owned get aggregated together. Main residence is generally exempt.

 

[travelbug]

Add all land values together (except PPOR), subtract $432,000 then multiply that figure by 1.6% then add $100. That's how much you pay.

And yes if under $432K pay nothing.

 

[Logan]

so what happens if your IP land value goes up in value and the exceeds the threshold ?

In a slightly related question what if you buy in a trust (in QLD) and the values go up and you exceed the trust threshold ?

Do land values generally go up with house price increases ?

 

[evan1875]

so what happens if your IP land value goes up in value and the exceeds the threshold ?

In a slightly related question what if you buy in a trust (in QLD) and the values go up and you exceed the trust threshold ?

Do land values generally go up with house price increases ?

Then you pay land tax.

In QLD the threshold for trust I think is 360K. If you go over that then you pay land tax.

Yes land values go up with house price.

 

[Terry_w]

so what happens if your IP land value goes up in value and the exceeds the threshold ?

In a slightly related question what if you buy in a trust (in QLD) and the values go up and you exceed the trust threshold ?

Do land values generally go up with house price increases ?

If land values go up and exceed thresholds then you will pay land tax.

in QLD same with trusts. Watch out in QLD as beneficiaries can be liable if the trustee doesn't pay.

 

[RetireRich101]

In NSW, say we have this situation:

Client ID1
Mr & Mrs Smith in joint names:
Total land value $532,000, hence $100,000 over the threshold hence required paying land tax for this Client ID1

Client ID2
Mr Smith himself also have 1 property under his name only
Total land value of this 1 property is $80,000
Taking 50% ownership in Client ID1, $266,000+$80,000 = $346,000.
No land tax is required to pay under Client ID2 because it is under the threshold.

Say if Mr & Mrs Smith wants to buy more properties in NSW, and buying under Mrs Smith name only is not an option.

What would be best advise in this case, as to strategically minimize land tax going forward, assuming Mr & Mrs Smith only need to accumulate another $400,000 land value in NSW?

 

[Terry_w]

Mrs Smith could buy in her name with both Mr and Mrs on the loan if serviceability is an issue?

Other options
1. company
2. SMSF

 

[RetireRich101]

Mrs Smith could buy in her name with both Mr and Mrs on the loan if serviceability is an issue?

Other options
1. company
2. SMSF

So the "company" gets it's own Client ID3, and a threshold of $432,000, regardless Mr & Mrs Smith is a member/share holder and has land value (as above) outside this company?

Put it simple terms for me to understand...If Mr&Mrs Smith sets up Smith Property Pty Ltd (with Mr&Mrs Smith as share holder) and buys 2 property with combined land value of $400,000, then there is no land tax for this company or Client ID3. Mr&Mrs Smith will not incur additional land tax that they already have in individual/joint names.

Is this correct understanding?

But putting Mrs Smith under the title only, and the loan under Mr and Mrs Smith might be a simpler approach.

 

[Terry_w]

So the "company" gets it's own Client ID3, and a threshold of $432,000, regardless Mr & Mrs Smith is a member/share holder and has land value (as above) outside this company?

Put it simple terms for me to understand...If Mr&Mrs Smith sets up Smith Property Pty Ltd (with Mr&Mrs Smith as share holder) and buys 2 property with combined land value of $400,000, then there is no land tax for this company or Client ID3. Mr&Mrs Smith will not incur additional land tax that they already have in individual/joint names.

Is this correct understanding?

But putting Mrs Smith under the title only, and the loan under Mr and Mrs Smith might be a simpler approach.

Yes that is correct. But check with your lawyer or tax agent as separate companies can be lumped together as one owner under certain circumstances. And there are different rules if the company is acting as trustee

 

[RetireRich101]

Thanks Terry

 

[Bhp19]

How frequently does the land tax threshold increase?

 

[RetireRich101]

I thought it doesn't increase that frequently, but according to below for NSW it does increase small amount each year.

http://www.osr.nsw.gov.au/taxes/land/about/rates#lt2015

not sure of other States though

 

[Terry_w]

NSW increases each year. QLD seems to stay the same...

 

[Biz]

Yes that is correct. But check with your lawyer or tax agent as separate companies can be lumped together as one owner under certain circumstances. And there are different rules if the company is acting as trustee

Are you sure about that? My understanding is companies and trusts get no threshold in nsw.

Edit: Just checked on the website, right you are! I remember at one stage though they did scrap the threshold for companies?

 

[Terry_w]

Are you sure about that? My understanding is companies and trusts get no threshold in nsw.

Edit: Just checked on the website, right you are! I remember at one stage though they did scrap the threshold for companies?

Never heard of that before. A company is classed as a 'person' under the land tax management act and persons get the threshold.

 

[Biz]

I think it might have been 10 years ago when they scrapped the threshold all together.

So effectively can you just keep registering pty ltd companies and keep getting a new threshold?

 

[Biz]

Special trusts and non-concessional companies: there is no threshold in 2009 for non-concessional companies and special trusts. These entities will be taxed at the flat rate of 1.6% on the total value of all the taxable land owned.

That is what i was thinking regarding there be no threshold. Prior to 2009 this was the case.

 

[Terry_w]

So effectively can you just keep registering pty ltd companies and keep getting a new threshold?

No you can't because related companies can be aggregated together.