Help Required - Variance Analysis

Discussion in 'Accounting & Tax' started by Sashatheman, 13th Jul, 2017.

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  1. Sashatheman

    Sashatheman Well-Known Member

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    Hi all

    I can't seem to figure out how I can show three drivers behind a variance for a year on year Land Tax Expense increase.
    In my example there are only three components. Land Valuation (a), Tax free Threshold (b) and Tax rate % (c). So land tax payable for a given year is [(a)-(b)] * (c) = (d)

    If all three components change from one year to the next. I want to explain the variance in total land tax payable by talking to each of the three components i listed below. For example due to increase in valuation & due to increase in tax-free threshold & due to change in tax rate.

    See excel link below, how can i do it?

    Understanding Variance Drivers
     
    Sashatheman, 13th Jul, 2017
    #1
  2. geoffw

    geoffw Moderator Staff Member

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    Is land tax dependant on your income? I thought that it was just a tax payable on the value of the land, ignoring your personal income.
     
    geoffw, 14th Jul, 2017
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    mikey7 likes this.
  3. mikey7

    mikey7 Well-Known Member

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    mikey7, 14th Jul, 2017
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  4. Sashatheman

    Sashatheman Well-Known Member

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    When i said Tax-free threshold, i was not talking about my personal income tax rates. I was talking about the threshold at which an individual/company is not required to pay land tax for an investment property.
    I think currently in NSW it is like $549k
     
    Sashatheman, 17th Jul, 2017
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  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Land value is averaged over 3 years so you don't get a large fluctuation each year.

    The threshold is adjusted annually and any value above the threshold is taxed @ 1.6%, more heavily (2% on excess) if you have more than about $3m
     
    Scott No Mates, 17th Jul, 2017
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  6. geoffw

    geoffw Moderator Staff Member

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    I've done some work on your spreadsheet, now that I understand what you're doing.
    Understanding Variance Drivers

    Any results you can check using the OSR website calculator Office of State Revenue

    Note that there is an additional $100 levied if there is any tax payable.
     
    geoffw, 17th Jul, 2017
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  7. Scott No Mates

    Scott No Mates Well-Known Member

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    If you exceed the second threshold ie $3m, then use

    Tax = $100 + ($549,000*1.6%) + (land value - $3,000,000)*2%

    You also need 3 years of land values to average, you're only showing 2 years.
     
    Scott No Mates, 17th Jul, 2017
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  8. geoffw

    geoffw Moderator Staff Member

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    I believe I've accounted for the first point, although I have shown three separate tax amounts which are then added together. This was meant to make it a little clearer what I had done, although obviously it didn't work.
     
    geoffw, 17th Jul, 2017
    #8