TOO MUCH LAND TAX

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From: Martin Dorney



Hi all,

Does anyone have any suggestions, comments or advice as to how to possibly reduce individual land tax situation.

My land tax bill increased by a whopping 100% in year 2000, after purchasing another property in 1999.
My land tax bill has just increased a further 70% in 2001, without even purchasing another property during the previous year.

All existing properties are held in joint names and situated in the Melb. area.

This seems ridiculous, cannot possibly increase rents to cover such costs etc.

AM I MISSING SOMETHING OR WHAT?

Any advice would be greatly, greatly appreciated.

Thanks,
Martin.
 
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Reply: 1
From: Michael G


Hi,

Land tax (as I understand it) is based on the total value of land held by an entity be is a person (you) a company or trust.

Because human-cloning has not been perfected yet so you are limited to the amount of land you can own before reaching the land tax threshold.

So some use trusts to "control" their property. Once a trust reaches this limit, they then create a new trust and start filling this one.

Correct me if I'm wrong, but you only need one company trustee to control all this, you just need to set up a new trust each time.

Others prefer to buy units and flats as opposed to houses because the land content is smaller and so are able to acquire more property before hitting the same barrier.

Its all about who actually "owns" the property that determines who pays the tax.

Regards
Michael
 
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Reply: 2
From: Diane -


Hi Martin,
I am from NSW and had the same problem with land tax as you. The mistake we made was having all properties in joint names. We got another threshold by putting a couple of properties in separate names - this has saved us thousands of dollars and the setting up was well worth the hassle. Of course the situation would not have arisen with better advice from our solicitor and accountant before the situation arose. I guess this hammers home that you need people who are very IP smart doing your legals and accountancy. It cost us some fees for the set up and we paid capital gains tax up to date. You might get a valuer on side to be very conservative with their valuation especially when they know why you want the valuation done thereby reducing your tax liability. I guess you would change names on the deeds of properties with the least capital gains. We left loans the same (joint) and did not have any problems with our lender with changing the title. Hope this helps.

Diane
 
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Reply: 1.1
From: Robert Forward


You hit the nail on the head there Michael.

It's a matter of who actually holds the property title. Though this doesn't work for those who are negatively geared because you can't write off your personal taxes against a property that is held in a trust.

And yes a company can be the administrator of more then trust. Your company can actually be the administrator of anyones trust if they so wish it to be.

But this is everything you need to think about when you first start up. It took me 6 months and 7 accountants to get most of what I wanted set up but now I'm set for the long term.

Cheers
Robert
 
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Reply: 3
From: Rolf Latham


Buy in a different state for next IPs since land tax is state based you would get new thresholds

Regards

Rolf
 
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Reply: 3.1
From: Donna Larcos


Unfortunately, as I understand it, trusts do
not get a threshold. They pay land tax
from dollar one and this is certainly the
case for the property I own in a
discretionary family trust.

Anyone else hold property in a trust setup
and no pay land tax?
 
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Reply: 3.1.1
From: Martin Dorney


Hi all,

Thanks greatly for your comments, much appreciated especially Dianne.
Seem to be in a similar situation, costly indeed, very costly.
Land tax is approx. 15% of gross rental!

I too sort advice from my accountant who i have used for many years and legal advice which was not helpful at the time.

I probably need to change both accountants and solicitors in the near future.

Any recommendations from anyone in Melb?

Thanks,
martin.
 
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