Stamp Duty rant

[steveadl]

Just doing the calculations for a buy I'm making for someone, and apart from the fact that Stamp Duty was supposed to be removed by the state govts. when the GST came in...

The stamp duty on the house cost of $255k is a minimum $2000 more in SA than every other state (excl. VIC).

There endeth the rant.

 

[tiger]

Stamp duty in Vic makes a mockery of even using the FHOG.
I'm with ya Steve

 

[skater]

Stamp duty, unfortunately is a cost of doing business. And, yes, it is highway robbery.

 

[letiha]

we recently got 3 blocks in the same estate, not next to each other but because it was from the same vendor we got charged stamp duty calculated by adding all 3 blocks together, meabing we had to pay an extra $1250 on each block, now that was a rip off.

 

[lizzie]

And, yes, it is highway robbery.

yep - big time. after the tax returns came back i took a double take at how much money we'd "made" over the last financial year and wondered where it had all gone ...

... then i recalled the stamp duty on our new ppor was $40,000 alone.

add in the rates of all the ip's, the land tax, the utilities service fees ... blah blah blah ...

 

[Pushka]

Yep, just forked out $33,000 myself last month, for absolutely nothing! I agree, robbery. Rann will never get rid of it though, and as our house prices surge, well, Foley is laughing. So much for GST.

 

[steveadl]

Yeah, just paid over $15k last month for my new PPOR, plus another $2k in transfer etc.

All stamp duty sucks, just don't see why we're paying so much more here in SA (& VIC).

That's the problem, they won't get rid of it now as there is no benefit to them, or consequence. They should have been forced to remove it years ago as soon as they started dragging their feet.

 

[Ausprop]

I think my stamp duty bill for the last year or so would be around $1m. to add insult to injury the state govt said at the last budget that they would drop the land tax rate. they did this and then the VGO turned around and upped everyones valuations by even more! As to payroll tax I fail to see how any government can claim to be progressive whilst taxing an employer for creating jobs... good grief the fed govt is fighting with one arm tied behind it's back, that is, tied with the red tap of state govt bureacracy.

 

[simonjulie]

You know what they say about death and taxes, we can't avoid them.
Bottom line though is if we buy well and get the growth we hoped for the taxes are only a small component of the overall return for holding the investment. Those that are complaining of the pain have not yet made the gain. Why blame others for our own strategy shortfalls?
Cheers
Simon

 

[steveadl]

You know what they say about death and taxes, we can't avoid them.
Bottom line though is if we buy well and get the growth we hoped for the taxes are only a small component of the overall return for holding the investment. Those that are complaining of the pain have not yet made the gain. Why blame others for our own strategy shortfalls?
Cheers
Simon

Very true. The one good side I can see out of it, is that it keeps the property market somewhat more stable as opposed to the large fluctuations you can get on the sharemarket etc.

Just don't get why we're penalized more for being over here in SA.

 

[acer]

Land Tax is the curse

You know what they say about death and taxes, we can't avoid them.
Bottom line though is if we buy well and get the growth we hoped for the taxes are only a small component of the overall return for holding the investment. Those that are complaining of the pain have not yet made the gain. Why blame others for our own strategy shortfalls?
Cheers
Simon

The state govt taxes are a problem. They should be a major consideration for investors as they can have the effect of blowing apart an investment plan.

Whilst stamp duty is an outright rip off, at least its one off and can be factored in as part of the deal.

The real issue is LAND TAX.....consider (NSW) rate of 1.7% annual tax on each dollar over the threshold. If you hold 1m land value thats 12,000 - 17,000 per year (depending on ownership), levied each and every year.....also indexed as value increases.

Whilst this figure may seem distant at this time......working on the principal that property indeed doulbles / triples each 10yrs, it soon will become a factor for many investors.

I know the argument that this can be offset by rent increase / CG etc but my point is the tax is levied each year and as property owners you have no control on where this will end. I see Land Tax as a sleeper that will play a significant role in future property investment.

We should be putting more pressure on govt to reduce (reliance) on land tax
as it is an easy revenue target.

Sorry to diverse off topic but there is the link with state govt tax.

 

[Ausprop]

I think it is very relevant acer. I will continue to hold some resi IPs but hereon in I will churn and burn em. Govts see property as an easy taxable target, so I plan to invest more in shares as a place to park my buy and hold $s.

 

[acer]

I think it is very relevant acer. I will continue to hold some resi IPs but hereon in I will churn and burn em. Govts see property as an easy taxable target, so I plan to invest more in shares as a place to park my buy and hold $s.

Yes Ausprop, thats my angle also, good to make CG $$ in property.....but as a long term hold you have to be selective. Taxation is an issue that eats into income and beyond our control. I see it becoming more of a burden in years to come, unless the govt backs off (I dont think they will as its their major source of funds).

 

[austini]

I think it is very relevant acer. I will continue to hold some resi IPs but hereon in I will churn and burn em. Govts see property as an easy taxable target, so I plan to invest more in shares as a place to park my buy and hold $s.

Yep,

I agree. I stopped buying property a couple of years ago and intend to progressively sell most of them in the next 5 - 10 years. Property will always be a cash cow for the state governments. RE commissions are rediculous. Quality dividend shares and LPTs not only return great tax effective income but the transaction costs are incredibly low and there's no land taxes, rates, property mgrs, liability issues, maintenance and tenant issues etc etc etc to deal with. Plus it is much easier to diversify as you don't have to commit so much funds to an individual transaction as in property.

In fact over the years I have gone from loving property to pretty much hating it nowadays.

Cheers - Gordon

 

[pski]

Yep,

Quality dividend shares and LPTs not only return great tax effective income but the transaction costs are incredibly low and there's no land taxes, rates, property mgrs, liability issues, maintenance and tenant issues etc etc etc to deal with. Plus it is much easier to diversify as you don't have to commit so much funds to an individual transaction as in property.

Using Macquarie Prime you can even leverage them up to 95%.
Eg.
CFS Retail Property Trust 5% (Collateral Down)
GPT GPT Group 5%
CER Centro Retail Group 10%
CNP Centro Properties Group. 10%
CPA Commonwealth Property Office Fund 10%
DRT DB RREEF Trust 10%
.................... and the rest.

 

[steveadl]

Agree with you over land tax too. Definitely another money grab - evidenced by the fact that it is based on the value of the property. I know a great deal of the value of an IP is the underlying land (especially with old buildings), but if it's a land tax, then should'nt it be calculated on how much land you own ie. m2 instead of value of all your holdings incl. building value etc?

 

[joeygbh]

As far as I am concerned, the labour governement in Victoria can put up or shut up about housing affordability with their Stamp Duty being 2x almost everywhere else.

So until they do something about it, I say labour has no moral right to speak about housing affordability.

 

[FrankGrimes]

Using Macquarie Prime you can even leverage them up to 95%.
Eg.
CFS Retail Property Trust 5% (Collateral Down)
GPT GPT Group 5%
CER Centro Retail Group 10%
CNP Centro Properties Group. 10%
CPA Commonwealth Property Office Fund 10%
DRT DB RREEF Trust 10%
.................... and the rest.

SLF @ 10% as well. Just tracks the LPT index, couldn't be more simple!

 

[simonjulie]

Yep,

In fact over the years I have gone from loving property to pretty much hating it nowadays.

Cheers - Gordon

Music to my ears Gordon
When I hear comments like that I get inspired to get even more excited about property.
I hope everyone gets out of property and goes to shares because that will leave me with more opportunities to grow my property asset base. The deals are already starting to come in. I just keep practicing until the right one emerges.
Taxes are just a cost of doing business and it is left to us to decide which is the best and most effective way to strategize our way through.
A question for you. Have you ever wondered why governments tax one investment area harder than others? The answer is simple. The higher the tax on the investment the better the investment potential is and another thing to keep in mind is the fact that if the government(or those who control them) would like the general public to invest in an area that the government(or those that control it)feel relevant to there outcomes. Why do you think the super annuation strategies of late have been made more attractive to the general public? It has little to do with the fact that a number of pollitions are retiring soon(although those individual would not be seen complaining, I bet)
Have fun
Simon

 

[austini]

SLF @ 10% as well. Just tracks the LPT index, couldn't be more simple!

And taking into account property litigation risk, loop-holes in insurance policies and even rarer events like tidal surges in coastal areas etc I'd go so far to say that products like index funds and LICs are even safer than houses. Admitably shares are more volatile but if you focus on the income aspect of shares then market ups and downs don't really matter. With a broad based income oriented portfolio (easy with LICs and index funds) there will always be dividends and LPT distributions etc even during bear markets. But if there isn't it would likely mean a total collapse of the economy in which case most tenants won't be able to afford to pay rent to property investors either.

Cheers - Gordon