Is Land Tax stopping you from buying your next IP?

Hi all,

Currently own(Vic):
3 x IP's land value = $2.3M. Rental $42,640 excluding expenses.
Land Tax = $15,875

If I add another IP to my portfolio(actually this will be my PPOR and then buy another PPOR), that becomes:
4 x IP's land value = $3.3M. Rental $72,640 excluding expenses.
Land Tax = $31,725. Double!

So rental minus land tax leaves me with $40,915. Then subtract rates, agent fees, maintenance and interest and you can see where this is heading.

In other words my $4M worth of property investing returns about $30K per year after expenses if I'm lucky(Not including interest). Hmmmm....

So, I am in a really good position to buy another property, but Land Tax is a show stopper.

Who else is in the same boat? I think I'll just go fishing.

 

The trick is to buy in different States.

 

I am aware of that little trick and it's a good one. Just not for me.

 

Buy in different entitles - ie company trust?

 

The low threshold used in Vic doesnt really assist a entity very much. The most effective strategy is to spread interest in land across different states to AVOID land tax which is a costly outgoing. Obviously ensuring that your targetted needs for growth, cashflow, yield etc arent compromised. However with a substantial land tax saving you can afford a little compromise. Land tax vastly reduces net earnings.

Owning only land in your own state is a bit like suggesting you wont buy BHP shares unless they only owned mines in Victoria because you want to see them.
A good investment isnt something you need to see.

Cashflows of each property should be compared, not just income or some expenses. All cashflows including tax

Our property estimator tool can be helpful

 

I see many who feel the same and this does stop some from investing further in property

 

definately..

And if stamp duty gets changed to a land tax what happens? Do investors pay this new land tax + this old land tax? Land tax squared?

 

Land tax coupled with low CG... Pain in the A.

With lower rental and higher vacancy rate, sometimes makes me wonder why bother... keep trying to convince we are in this game long term.

Practising self-hypnosis

 

The stamp duty (NSW) proposal has hit a funding roadblock. The proposal would see avast cashflow shortfall and the Comonwealth arent prepared to consider it - at all.
Its also inconsistent with the curbs on investor speculation and could drive prices up. Yesterday media had largely condemned the proposal to the shredder. Premier Berejiklian agreed that the present $20B state cashflow shortfall without the duty proposal ($2-$4b) is the first problem to tackle after jobs. She seemed to dismiss the plan.

The proposal was stamp duty would remain and be a CHOICE of a annualised charge with no limit of duration OR a upfront fixed charge. Obviously flippers would desire the annualised where long term buyers may favour the fixed charge. So it is a bit anti-policy in that respect.

 

Thanks everyone. Have decided to pump $1m into my home instead of buying another IP and hopefully sell that at a later date for a good price. And most importantly tax free!

 

Few of us are, so can you buy under different entity, does VIC have separate tax for trust and in own names, can you buy with other name like spouse?
It is a killer hence why we split in other states and other entities.

 

Yes. But Vic has a low threshold. Consider other states as each threshold is seperate

 

That's a serious reno.

 

That's how much the advisor suggested to sink into the dilapidated 2 bedroom unit on Luxford Rd.

Doesn't everyone drop that sort of coin on their palatial digs.

 

LOL! Yeah, that's what I do.

 

Adviser ? LOL sounds like a mortgage broker.
Did they give tax advice? I would be concerned that a $1m project on a home may often NOT be tax free. In fact you could even have a major GST issue.

If you demo anything, substantially renovate or build additional dwellings on the lot its all likely a profit making venture and not tax free. There are some important matters to consider. And you could also still have a land tax issue on top. For what you consider is your home.

Worthwhile to get tax advice on the plan

 

Land tax is BS. We should be reducing taxes.