The Age' Victorian Land Tax article

From: Kristine .

Did anyone read the article in ‘The Age’ on Sunday headed ‘(Victorian) Land Tax Increase Hits Property Investors’?

Although the focus of the article was centered on the increase in values on the Mornington Peninsula, it was this which caught my eye:

‘Although Mr & Mrs use the home as their principal residence, they are still liable for the land tax (quoted as $41,603 this year!!!) as the property was bought by Mr’s company. … He says that the stamp duty he would have to pay on the sale of the home to himself to avoid the land tax would amount to 10 years land tax.’

This raises the question of properties bought in the name of family companies and trusts. Tax is one of those things which gets you coming or going. You may be able to avoid it in the short term by structuring your purchases in a certain way, but when you are relying on the income in your retirement, will the tax issue come back to haunt you?

Just my thought for the day

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Reply: 1
From: Gordon Austin

Trusts are treated very harsly in most states when it comes to land tax. Over time as land values keep increasing (especially in capital cities) the land tax payments will become a significant burden. However I keep reminding myself that it is not just the rent but access to the significant increase in equity which goes hand in hand with land value increases. And of course there are many ways to convert this equity into an income stream for retirement or further investment in other asset classes.

However if governments get too greedy with land tax and other property related taxes it will only be a matter of time when investors decide that other asset classes such as shares are a preferred option. Then the supply of rental properties will decrease and yields will rise. And given that governments don't like being in the business of providing public housing they may be forced to reduce these taxes. But this may not apply to trusts which seem to be unfairly targeted most of the time. I think something like this happened when negative gearing was removed in the 80's.


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