VICTORIA - Land Tax & Trusts

A general enquiry for those holding properties (land) in Victoria. Land tax seems to be astronomically high. Here are some rough calculations for an entity that owns the stated amount of land.

$500,000 $775
$1,000,000 $2,975
$1,500,000 $6,975
$2,000,000 $11,975

Trusts
$500,000 $2,363
$1,000,000 $6,438
$1,500,000 $12,313
$2,000,000 $17,360

With prices in Victoria, only 2-3 properties might see you at the $1.5 million mark.

I have a trust. It owns property, currently land tax is around $900 per year. I have this temptation to purchase another property. But this would well and truly put me above $1,000,000 worth of land. And in a trust my estimate would be $7,500 per year in land tax.

I have crunched every number for this potential purchase, but the one thing that really bites is land tax. Purchase price, stamp duty, loan repayments and just about everything else I can live with and deal with (mainly because these are once off, or can be reduced). But land tax; it makes the whole deal seem too much trouble. And it's only going to get higher!

Here are the actual figures provided by the Victorian Government:
http://www.sro.vic.gov.au/sro/srona...575D20021EBE7C580F3A333F4AD44CA2575D10080AD1C

I'm curious that people over the last few years must surely be receiving rather large land tax bills. It must be happening, and it must be really pushing some people to consider the advantages of property. It's pushing near 1% of the value of something that may only be bringing in 3-5% a year in rent.

On a similar note, I feel that having property in a trust has provided me with absolutely no additional advantages, and if anything the whole process has been far too costly. Setting up fees, accountant fees, and lack of tax deductibility, and then the extra land tax really doesn't make the whole exercise worthwhile. And before you say it, I'm in a situation where the trust is actually producing money (which I doubt can be said for all trusts out there).

Is land tax simply the cost of doing business? And let's hypothesise for a moment, if one were to own $10,000,000 worth of land (which logically must happen somewhere) would this entity be up for $182,475 per year in land tax? That's pushing 2% per year!
 
In NSW you would be up for 1.6% of the value of the land each year. This is a killer.

The only solution is to invest in shares or maybe in QLD.
 
The rates are based on just the land value and not the capitalised value.

We recently purchased four properties and after considering land tax, and as you mentioned the annual increases we decided to purchase them in my wife's name.

The land tax savings for the first year alone was over $6000. In the long term that just gets bigger and bigger.

So, yes land tax is a killer. You need to weigh up the benefits of a trust versus its costs.

In this case we decided against it.

Huss.
 
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