land tax question - too late to fix?

Discussion in 'Accounting & Tax' started by Joe W, 1st Dec, 2016.

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  1. Joe W

    Joe W Member

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    Hi guys, my parents currently own 2 property in NSW. One house (primary residence) and one investment property. Both are under joint ownership.

    They now want to buy a house, but under the land tax laws and ridiculous price of houses, it would mean they have to pay land tax on the investment property. They will borrow money for the mortgage based based on combined earnings.

    I've read a lot of articles about this - suggesting splitting property under individual ownership, or putting a property in a SMSF.

    I am wondering what is the most cost-effective decision right now? Is it to perhaps transfer the primary residence to one person (and pay stamp duty)?

    Value of properties:
    Currently owned and residential house: $1-2m
    Apartment: $500k-1m
    Proposed house they want to buy: $1-2m
     
  2. Propertunity

    Propertunity Well-Known Member

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    Land tax is levied on the land component only not the total value of the IP. What is the value of each IPs land?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    To get some legal advice as there are many implications other than land tax and stamp duty.
     
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  4. Elives

    Elives Well-Known Member

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    Land tax related question..

    If you have a PPOR but then start renting it out, would it still be exempt from land tax? (within the first 6 years)

    Cheers, Elives
     
  5. Joe W

    Joe W Member

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    The PPOR exceeds the threshold by a lot (but it's exempt as it's owner occupied). The property they want to buy will have land value of around $800,000 I reckon. So on top of the apartment, looking at taxable land value of around $500k.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    generally not
     
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  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Buy a waterfront unit - it won’t contribute much land value but due to its superior location will have food capital gains and returns.
     
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Price of tomatos and potato's go up ?
     
  9. Joe W

    Joe W Member

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    So no answer?

    Was thinking with the new investment house best way is not claim negative gearing. So no land tax needs to be paid.
     
  10. Befuddled

    Befuddled Well-Known Member

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    Land tax | Office of State Revenue

    "Land tax applies to land regardless of whether income is earned from the land."
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Whats the question?

    How to reduce land tax?
    Transfer existing properties into single names, consider a SMSF or company as the entity to own the next one.

    But there is far more to consider than just land tax.
     
  12. Joe W

    Joe W Member

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    Yes that's the question. Thanks for the answer. Is it generally worth it to transfer the existing into a single name, and purchase the new one under joint ownership? From what i understand there are hefty fees involved.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It can be worth it depending on the situation. There will be hefty fees, but it could also
    a) increase tax deductions meaning savings for years to come
    b) allow the other person to come off loans, improving borrowing capacity
    c) allow for more effective estate planning
    d) improved asset protection in some instances

    etc

    see
    Tax Tip 21: Tax Advantages of Buying property in 1 name only https://propertychat.com.au/communi...tages-of-buying-property-in-1-name-only.2967/
     
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