ACT Canberra rates and land tax hikes

Discussion in 'Where to Buy' started by pacey, 11th Apr, 2017.

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  1. pacey

    pacey Well-Known Member

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    The ACT government are set to announce big hikes in rates and land taxes in their June budget, according to an article today in Canberra Times...

    Big rates and land tax hike for Canberra apartment owners

    This is especially going to impact on unit owners by the look of it. How do you see this impacting on the local property market for investors and landlords? Will landlords pass on the increased costs to tenants thereby increasing rents broadly? How will property investors with bigger loans manage these increased costs?
     
  2. Matthew

    Matthew Active Member

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    One of the reasons I've never bought an investment property in Canberra is because of their land tax and the fact it applies from a zero base. I know a number of property commentators like Ben Kingsley steer clear too because of this.
    It's a shame, I like Canberra and lived there for a number of years and the real estate market seems quite upbeat.

    At the end of the day I guess landlords will pass on as much as the additional costs as possible and somehow have to absorb the rest.
     
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  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Just need to factor in land tax to your holding costs when carrying out due diligence. If the numbers still stack up then I wouldn't ignore Canberra because of land tax.

    Stamp duty can be claimed as a deduction in the first year of ownership too.

    Cheers

    Jamie
     
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  4. Cimbom

    Cimbom Well-Known Member

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    Yield can be pretty decent in Canberra given that it's a metropolitan location - land tax reduces it a bit but it's still better than many other places (if that's your only comparison). We're getting about 6% which is pretty difficult to get in say Sydney or Melbourne. This is for a house btw
     
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  5. pacey

    pacey Well-Known Member

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    Thanks for your replies. I've been kind of forced into a situation which is a long story, where I've had to move out of my unit to rent elsewhere in Canberra. I've moved my loan with CBA to IO and in the meantime getting some repairs done to the unit to rent it out. Rather unfortunate for me is it is one of the old units on Springvale Drive Hawker. So these are not particularly attractive places either to rent or sell though it appears they might be picking up again. I have a FT job clearing almost 1k per week (72k salary) but these rate and tax increases are not helping. My rental property from my calculations which includes loan interest shows it will be negatively geared. I suppose working with a good accountant will help with claiming as many tax deductions on these expenses. Do tax deductions help with these expenses? Is there a standard percentage of these expenses that can be claimed? Does being negative geared affect tax deductions claims or is it the same regardless of negative/positive geared?
     
  6. bunkai

    bunkai Well-Known Member

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    Those units have had a fairly strong yield in the past and aren't that unattractive as a starter place. What is the debt and rent? I'll add that they have a huge land component but too many other unit blocks to make it worth redeveloping.
     
  7. pacey

    pacey Well-Known Member

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    The debt is 265k and rents for these units (two bedroom) is around 300 per week. AllHomes is showing a unit at 28 Springvale Drive similar to mine struggling to get rented at 300 per week. Though I think once I get the jobs done my unit will be better and I know that other one well as I was a tenant there myself back in 2008.
     
  8. S1mon

    S1mon Well-Known Member

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    not the nicest units as you say but a good location..are they the ones with a shared laundry?
    based on your questions, sounds like you need to do some basic investment property tax research / reading. im no expert buy happy to discuss / help with calcs

    as for rates...nothing surprises me anymore...i guess I would be surprised though if they increased by less than 8% in any given year
     
  9. pacey

    pacey Well-Known Member

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    Yeah most of them have their own laundry down in the storage area. Fortunately mine is the European style as it is called... The washing machine fits straight into the bathroom and run the water down the sink. And the units are in a good location as you mentioned with Hawker shops just a few mins walk and close drive to Belconnen Mall etc.
     
  10. pacey

    pacey Well-Known Member

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    Am pleased to see that unit I mentioned above that appeared to be struggling to get a tenant rented.

    11/28 Springvale Drive, Hawker Real Estate For Rent

    It's a unit similar to mine in the next door unit complex. I actually use to rent it myself. It was advertised for 300 per week but don't what the actual rent was settled on.
     
  11. Chris Au

    Chris Au Well-Known Member

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    Have you got yourself a property-savvy accountant?

    There are a few from Canberra on the forum, so if you would like to talk through accountant options, I'm sure others can suggest an accountant. Talk with your accountant early about setting up your paperwork, accounts etc so you can claim the most. Make the most of it until you can/need to sell.
     
  12. pacey

    pacey Well-Known Member

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    No I don't have a property-savvy accountant so need to find one.
     
  13. Chris Au

    Chris Au Well-Known Member

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    Put a question in the accounting section of the forum so others can see your question, and you get wider thoughts. If you need a CBR based accountant, I've heard Hadrill accounting is ok. There is also the services section of the forum.
    Good to get set up early so everyone's clear rather than putting things in place then having to unpick them.
     
  14. Jaggannath

    Jaggannath Well-Known Member

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    I use Paul from Price Financial. It's handy I can do it all online, as we move around every couple of years for work.

    For information, I pay about $4700 in land tax and nearly $2700 in rates on my property, which is a pretty big kick in the guts. At the time I bought they hadn't introduced the land tax component in the way they did, and I was living in it at the time.
     
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  15. pacey

    pacey Well-Known Member

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    Goodness what state is this in Jaggannath? Are these rates and taxes for an apartment or house?
     
  16. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I'm almost certain it would be a house.....a rather expensive one.

    Cheers

    Jamie
     
  17. pacey

    pacey Well-Known Member

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    Gee that's ridiculous. How can housing ever be affordable when governments are reaching more and more into landlords' pockets. Of course landlords need to pass on much of these costs to tenants. I suppose these are all tax deductible at least, which means states placing more of a tax burden on the federal budget.
     
  18. S1mon

    S1mon Well-Known Member

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    that's what I have been saying for years...Fed govt can thank the ACt govt for all the negatively geared (or not very much positively) properties in ACT.

     
  19. Jaggannath

    Jaggannath Well-Known Member

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    Yup, but not as expensive as you'd think. 700sqm block in Downer, detached house. Cost me $600k when I bought it, vacant block of similar size down the road was asking $600k a few weeks ago. It's $1090 + a percentage of AUV.

    Yeah, having paid stamp duty on it of $27k means I think it's a bit rude to then slug us with that level of land tax.
     
  20. pacey

    pacey Well-Known Member

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    Yeah it's ridiculous. Do any of the foreshadowed increases in rates and land taxes in the ACT affect home owners / investors?
     

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