I am in serious trouble over Land and Absentee tax in QLD

Hello,

I have posted my rant on other thread about Land Tax and Absentee tax in QLD.

I am in dire straits over a poor investment decision - buying an investment property in QLD as a self funded medically retired retiree who stays a lot of the time overseas to save on costs of living. A lump sum to see me through until my hopefully early death - as I will run out the way it is going.

Rental income stream is my main income source that nets me equivalent of a pension style income, without my own place to stay in. I exceed thresholds for benefits of course and so staying in a developing country on tourist visas helps me survive. I just cannot do it in Oz. I have no place I can live in Australia now. My property investment was a 'cost blow out' due to massive repairs needed before I rented it.

Land tax at corporate rate, reduced threshold and absentee tax added, plus the increasing taxes as year on year land valuations increase the amounts - will make this investment untenable. But capital gains will not grow fast enough it seems to get out while I can. I am set for massive losses. I do not know what to do.

That's my story.

 

It is not fair that they are penalising Australian Citizens with the 'absentee' provisions.

You get the lower threshold and the absentee surcharge = double kick in the groin.

Not much you can do unfortunately other than to sell.

 

I just did some calcs. Someone who owned land in QLD worth $500,000 could be paying $6,250 more, per year, in land tax if they reside overseas.

 

My last tax payment due which I lodged an LT16 review application for is over $4800 for last year in total. I couldn't even increase rent to offset the tax increases with land value estimates seemingly going to make this a very expensive issue increasingly every year. Rental returns went backwards when I leased it.

I have been given a deadline end of this month then I cop the next massive bill due soon after which will be even more. If I had of known in Dec 2016 I was going to be paying this land tax plus absentee as the extra knife in the chest, I would have NEVER bought in QLD.

 

Can you move in to the IP? Then live off savings? Maybe apply for DSP (Disability Pension)?

 

Thanks for the idea but it is a big house and the rates alone would kill me. Plus investment threshold exceeds eligibility.

 

Could you live in it and rent out the other rooms?

 

Thanks for the suggestion but not with my medical/psych issues. Need to be alone and living in it I would then not be eligible for tax concessions that I desperately need to offset the costs - such as depreciation claims.

 

What country are you living in and how much is your cost of living there?
How much cash would you be left with if you sold the property?

I know someone in Thailand living off the dividends of 300k worth of shares. Your land tax it sounds like your property is valued over 500k, so this might be an option. Shares have about double the cash flow return compared to property once you take into account property expenses and franking credits.

 

I know someone in Thailand, an Aussie, living on $12,000 AUD per year!.

A simple solution for @Sick_of_scams may be to just make sure he doesn't meet the definition of 'absentee'. You just have to 'ordinarily reside in Australia'.

s 31 LTA
LAND TAX ACT 2010 - SECT 31 Meaning of absentee

Also consider s34

 

He must be a savvy intelligent investor! I have lost heaps on share market. Wanted something more stable so not stressed all the time watching the markets. Got a small portfolio in that but taken big losses since GFC that never recovered from.

Had a financial adviser do the maths and basically he said I may frugally eke out existence for 15 years if I did not invest properly and make capital gains somehow. Thailand is where I am mostly.

 

And have no access to past main residence periods or the 50% CGT discount apart from using accumulated tax losses to offset the taxable cap gain.

The land tax measures were intended to act as disincentive to people who want to live overseas and keep AU property which was making supply issues harder for first home buyers who were competing for supply with investors. QLD unveils new tax for foreign investors - API

The changes seem to be working and its going to take time for owners to sell their affected properties.

 

Yes investing in the stock market without investing for a growing income will mean you are missing the point, and with that lack of understanding you will sell when prices drop and totally screw it up. I think most people do this because it is hard to sift through all the bullsht put out by 'financial advisors' trying to line their own pockets to get through to the simply idea of a diversified low cost index investments being the answer.
You should have a read of the fantastic threads (and books recommended) on this site about low cost LIC's/ETF's and the idea of investing for a growing income.

 

What a fascinating situation, and welcome to the forums! I hope you have some luck sorting it all out...! Keep us in the loop.

 

Sell the property, put it in a nice safe index fund, for example VAS, so you get franking credits as well. 4% div yield, no shenanigans like land tax / absentee tax etc.

 

Is this just Queensland? From the NSW government website it appears non resident Australian citizens are exempt.

 

Yes, for citizens so far just QLD (to my knowledge)

 

I'm surprised Queensland isn't sued for this sort of discrimination against Australian citizens (or maybe they are). This is similar to the sort of crap Spain tried to pull against resident non-citizens (since they cant vote) but were pulled into line by the EU.

 

Another issue with living in your own place and renting out the rooms is that you also create a 'Capital Gains Event', meaning that whatever portion of that property you rented out whilst living in it will be subjected to Capital Gains tax when you sell it. It will not be eligible for Primary Residence exemption. Heaps of people all over Australia renting out a spare room on AirBnB etc are going to be in for a massive shock when it comes time to sell and the few extra bucks they may have made renting out a spare room will be well and truly lost because of the CGT owed. it is severe.

 

Living in Thailand on $12,000 AUD per year is well and truly frugal existence. You would need to be living in a country area and it would be barely subsisting. From many forums on the topic as well as my own experience, if you want to live comfortably in a main city/town area (avoid Phuket though as that is extremely expensive) then realistically you need to be living on around $50,000 AUD per year to have a decent quality of life and be able to have a life and travel back to Oz a couple of times a year. That may vary for some up and down of course, but in general. I have been living on a lot less than that and it is a struggle even in Thailand with a lot of street food and cooking myself and not going out at all there. Thailand is not cheap anymore.

To make sure I did not fall within the QLD Land tax definition of absentee means that I need to be in Australia for 6 months of a financial year, which is impractical as I am then forced to find rental accommodation in Australia in that time, which exceeds my income stream capability. To do so means I would be forced to sell to free up cash and end up with a massive capital loss - I would be unable to buy back into the market and the cash would last me around 8-10 years.

I already lodged an objection with OSR QLD regarding absentee status but they rejected it. There is very little room for exemptions. Any Queenslander/property owner in QLD who wants to even travel for more than a day over 6 months needs to pay the taxes too. Retirees are getting caught up in it too with their dream retirement holidays.

The other option I have seriously considered is 'roughing it' on the streets in Australia for 6 months of a year it will be miserable, unhealthy and dangerous of course being homeless, but then I avoid the QLD taxes and have 6 months of decent lifestyle back in Thailand or other SEA countries I may travel to and stay in cheap accommodation (no fixed preference as no fixed place of abode).