NSW Land Tax - Wow !!

R

ron redshaw

Hello & a Merry Xmas to all !
What happened to Land Tax ???
Last year our 3 IPs on the south coast came to $15,000 below the threashold. Now the same places come to about $47,000 above the new threashold !
Tax Free Threashold was increased by 18%.
Land Tax Valuations were increased by +80%.
My tax bill will only come to about $900, but if I buy again in the same area the Land tax will come to $3000!!
Is this just money grabbing by the Carr Govt ?
With a potential $2000 increase in my annual land tax bill, I will be looking to Qld for my next IP.
What are other forum members views ?
Regards, Ron Redshaw.
 
Ron

I am in the opposite position, im looking anywhere except QLD at the moment cause my land value is on the threshold of being taxed, if not over it.

Maybe someone knows ways of minimising (or avoiding) land tax in a particular state. (there doesnt seem a way around it tho)

Possibly buying more property in a trust or company name when your personal holdings get to the the land tax threshold?....just a thought...
 
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You can try to argue the valuations placed on the subject land.

There's a good article in the current API magazine about it.
 
Please forgive my ignorance, but was just wondering. Is land tax something that you can claim as an expense?

Or being a form of Tax is there nothing you can do about it?

Say a proptery has 10,000 in income for a year and then has 12,000 in deductions

Land tax is $1,000.
Can you add that to your expenses?

What about if you are positive geared and make say $5,000. Would you be able to claim the $1,000 land tax as an expense?

Many Thanks.

Adam.

Sidenote: I just skimmed through Jan Somers Book: "More Wealth from Residental Property" and only found a paragraph (p188 bottom) that doesn't really make it clear (to me at least)
 
just use the general rule if it is an expense to produce an income )now or in the future) it is a deduction
 
That makes sense, and my answer is that yes you can claim it as an expense.

But as it is a Tax, it kind of threw me and its always good to get someone elses opnion.

Thanks.
 
Hi Brains

A company will get the trheshold again but if there is more than one company with a common director then the second and subsequent companies are not eligible for the trheshold.

Trusts get no thresholds to eliminate the avoidance issue.

My land tax bill was > $30k last year and as far as I am concerned it is the most inequitable tax out as it does not reflect or relate to the income that the property generates or fails to generate. Mind you I don't like council or water rates either but at least you are getting some direct services.


Cheers
 
Although trusts aren't given any land tax thresholds, wouldn't your total land tax be reduced by buying each property in a separate trust?

Please correct me if I'm wrong but I was under the impression that if the value of the property held in each trust was less (and land tax was paid on each property individually), it would be taxed at a lower rate than it would be if land tax was paid on the total value of all properties grouped together?
 
Dear Handyandy and Brains,

Funny thing is that QLD is a little bit different with regards to land tax. For companies/trusts there are exemptions.

http://www.osr.qld.gov.au/tax_land.htm

Personally I think creating another trust to duplicate the level of exemptions certainly could be a way of getting around this.

Have your spouse be the director of one of the trustee companies of one trust and you the director of the other. If there was a problem with a common director then you could certainly get around this using this method.

Cheers,

Sunstone.
 
Hi

It is not uncommon for wealthier people to use different trusts, with different trustees to cap the amount of land tax payable upon their property portfolio. This will not suit everyone and can be a little more expensive, but, if it costs you $2,000 and saves you $30,000 every year - what could you do with the difference??

Some could retire on that difference. . . .

Some could buy another IP every year; and what would that do to your wealth?

Just a thought.
Hohoho

Dale
 
Dale,

The first question that springs to my mind then, is what happens to that person's land tax threshold?

For example, I am in a position where hiring a trustee to run a trust is a viable option for me. I "contract" my brother to be a trustee, paying him a wage (say from funds saved from land tax) to manage the trust.

Now what happens when he wishes to invest?, this would affect his position correct?, or would the government treat his position as a job (as it is), and wavied the assets under his management away from his personal land tax liability?

It would be the same, as hiring a professional trustee, if they were to manage a whole swag of trusts. Imagine if there were 100 trusts being manage, each individual one is just below the threshold, but collectively, way over. Would it be fair to clump these together and incur a high tax?

Like people say here, land tax doesn't make sense. We pay stamp duty to indicate that we bought the land, yet we still pay a fee to "own it"???

Maybe instead of being the Commonwealth of Australia, we should be called the Barony Of Australia and instead of being called citizens, maybe Serfs are more appropriate??? :p

Michael G
 
I was always under the impression that you simply set up another trust and that as it was another entity only the properties owned by that trust could be assessed for land tax.
 
Wouldn't buying property under leasehold terms as opposed to freehold free you up (or minimise) from the Land and Stamp Duty tax bill.

There seems to be little knowledge about this method but it is actually used in ACT. All property in ACT is a 99-year leashold and the "neligable" Stamp Duty bill is an allowable expense.... No Land Tax?

It would be different in each state but so long is not freehold, the ATO can not get you.

In this scenario, it does not matter if you buy property under a trust, company or your own name.

A lot of land in outback australia is traded on leashold basis, and it is quite common overseas as well (eg UK)

LPT's use this method to beef up their retunrs in the stock market, eg ING Propety Trust. It is viable in resideantial as well as comercial property.

Harold
 
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