Land Tax State By State Territory By Territory 2019

Something i had never even considered until now!

 

Circa 20k here for a portfolio def not even near 8 figures, all in vic. Rents are not great as they are larger lots of land in good spots with old homes so rents are obviously not fantastic.
The more I learn and longer I live shares start getting more appealing by the minute

 

Ok great information! Essentially it will need to be paid by 30/6/19 to still be deductible.

 

@Terry_w you noted the deductibility of land tax/claimed in the same financial year.

Could you please give a rough example of how it all works using round numbers (I'm a simple man) I.e someone earning 100k from work, 50k from rent, paying 20k in land tax and 10k in rates insurance etc. Do you get any of this land tax back based on your marginal tax rate etc? Sorry for the stupid question.

Thanks in advance

 

Land tax is an expense that is deductible like rates or insurances. It reduces your taxable income which reduces the amount of tax payable.

If you are receiving $50k from rent and there are $10k in expenses and $30k in land tax, your taxable income from the property is $10k which is added to your other income of $100k so you are taxed on $110k

 

Or you might have to amend the previous year's tax return, which would be a pain in the bottom.

 

VIC has very low land tax thresholds. No doubt about it. Stamp Duty is a killer too. 5%ish

 

Besjesus....I guess I can't complain then...on seven properties in Qld...I about 12k Land tax..plus...38k in expenses (rates, insurance) plus 67k in interest...I get rent of about 120k..so neutrally geared.

Hopefully you are no relying on the income side of things....because that will only leave with you about 30k...on assets worth over $2m.

 

LOL

Never held any property apart from the PPOR. I do feel for those who are getting squeezed.

 

Look at it from the other angle at least they are on large blocks ,and the 20k is just the cost of doing business and as the value is in the site not what sits above the block it will pay off one day....
In Australia there would be a large number ,even while losing a lot of money in the stock markets just sitting around waiting for the price of their shares lic;s to come back up and the market they lost their money is long gone,property is a different animal if you stay the distance..

 

What happens if you strike a payment arrangement with the State Revenue Office (SRO) on land tax before the end of the financial year. Assume $x is payable on 20 June 19 for land tax this FY. You ring SRO and say you cannot pay but strike payment arrangement to pay $x land tax debt back in equal instalments over the next 12 months (assume no interest is charged). Is the full $x claimable this FY.

Ie. you have incurred an $x expense on 20th June (fully deductible this FY), and taken on an $x debt on the 20th June. The $x liability is extentinguished progressively over next FY.

 

You would have to work out when the expense is incurred.

I don't think it would be claimable other than in the financial year for which it related to.

 

I would argue the full amount is incurred on 20th June 19, the point at which the debt is legally payable and the payment arrangement is struck.

 

I should say, the amount payable on 20th June 19 in my example relates to land tax for this FY.

 

Actually s8-1 ITAA97 says 'incurred' so it should be deductible this year, even if you pay next year.
'As a broad guide, you incur an outgoing at the time you owe a present money debt that you cannot escape.'

So what I wrote about above is not correct. Even if you pay next year it should be deductible in the year of the invoice.

That tax ruling related to a person who had not know about land tax and paid several past year's worth of tax in this year - which wasn't deductible.

 

I think there is another complication.

In Victoria, SRO allows you to pay land tax for this FY 2 ways:

A) 100% on 21 June 19, or

B) First payment in 8 Mar 19 + 3 additional instalments thereafter (monthly or fortnightly payments are also available). The 2nd to 4th instalments occur next FY.

So, if I am reading this correctly, best to chose option A). Incur full cost on 21 June 19. Then ring SRO and ask for payment arrangement on 100% of oustanding debt. So, get full deduction this FY, and buy time to pay to help cashflow.

If you choose option B), could be more problematic. First instalment may be deductible (this FY), but maybe not instalment 2-4 this FY, as arguably not incurred (ie. expense being legally payable) until next FY.

Hmmm. Complex!

 

Yes, sounds like with option 2 you will not incur until each invoice arrives.

 

This is what I say to foreigners when explaining the tax as to what it primarily drives=improvement of the structures on the land. It is arguably the reason why inner city warehouses/vacant land in Melbourne are far less common because the cost of holding said land is massive.

I would encourage all bemoaning land tax on here to look at some posts @Beano and I talk about wherein commercial real estate often features abilities where the tenant must pay your land tax. For some of you with the amount of properties you have, you would have the serviceability to buy a good commercial property purchase-however realise I now open myself up to the simple reply of 'I don't get/want to get commercial', which is fair enough.