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Just prepaid land tax - worthwhile doing for those who have a large tax bill

Discussion in 'Accounting & Tax' started by wylie, 22nd Jun, 2015.

  1. wylie

    wylie Moderator Staff Member

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    In the past, when I've needed to bring forward deductions into the current financial year, I've prepaid rates, the infrastructure portion of the urban utilities (water), and land tax. Land tax was not easy, but my perseverance paid off. I don't prepay land tax every year, but this year we have a LOT of tax to pay, so I thought I'd prepay it.

    Initial answer on the phone was "not sure" but the lady was very helpful, checked with a senior person and I was able to prepay as at today's date, using last year's reference number.

    This is something others might like to think about doing if they have a larger than usual tax bill coming up.
     
    skater likes this.
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    But the question you should be asking is "will this be deductible this year or next?"

    Has the land tax been incurred? Probably not incurred until the SRO issue you an invoice.


    Taxation Ruling TR 97/7 summarises various propositions of the Courts about when a loss or outgoing is 'incurred' for the purposes of section 8-1 of the ITAA 1997. The ruling states (at paragraph 5), 'As a broad guide, you incur an outgoing at the time you owe a present money debt that you cannot escape.'
     
  3. wylie

    wylie Moderator Staff Member

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    I'll be asking my accountant that question Terry. Hopefully he knows the answer :).

    I have to pay it either way. If I can claim TFY then that is a bonus.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Watch OSR's ...They may also refund the credit. If they do that after 30 June it severs the deduction. Make sure OSR flag your account so its not refunded.

    If your property is in QLD (30 June land tax year) then there is a fair chance the incurred test can be satisfied as the amount of tax can be ascertained reliable as you 1. own it. 2 can value it precisely using the unimproved land value and 3. You know the current rate of land tax.

    This should sit with the ATO views in ID 2010/192 which discusses when arrears are deductible. That ruling considers the nature of when land tax is incurred. It is clear that a taxpayer can self-assess land tax rather than wait for any assessment.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    My reading of ID 2010/192 is that this land tax won't be deductible until it is incurred. It is not incurred until it is the liability arises. Under s7 of the Land Tax Act QLD this would be midnight on 30 June:

    7 When a liability for land tax arises

    A liability for land tax for a financial year arises at midnight on 30 June immediately preceding the financial year.
    http://www5.austlii.edu.au/au/legis/qld/consol_act/lta201090/s7.html


    They could have picked another date because this is confusing on whether it would be this financial year or next. It is said 11.59 and 59 secs it would be this year, but mid night on the dot sounds like next year to me.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The ID considers a person not yet assessed would incur the deduction at midnight 30 june being the taxing date. The time when assessment may issue would b after this but incurred at 30 june. I have always had a issue with QLD and 30 June and this ID for that reason. It basically means all QLD taxpayers must accrue.
     
  7. wylie

    wylie Moderator Staff Member

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    Thanks for the tip. I called and they confirmed that it is possible it will be refunded via cheque, but my account has been noted so fingers crossed that doesn't happen.