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Land Tax

Discussion in 'General Property Chat' started by Mypropertyopinion, 27th Jul, 2016.

  1. Mypropertyopinion

    Mypropertyopinion Member

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    Hi everyone,

    I have a number of IPs in Sydney's metropolitan area - with land size ranging from 244sqm to 700sqm. It is attracting a lot of land tax and the amount is forever increasing year on year.

    The IPs are all purchased under my name only. Without selling any of the properties, is there anything I can do to reduce the amount of land tax paid every year?

    Any ideas or suggestions are appreciated!
     
  2. Big Will

    Big Will Well-Known Member

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    Nope it is a cost of doing business.

    The only way to lower it would be to challenge their valuations but you will be unlikely to succeed.

    I would love to have your problem :)
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not really. You could move into the one with the highest land value perhaps.
     
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Do trusts or companies get a land tax threshold in NSW? Could you do an arms-length sale to a trust or company structure?

    Of course, the stamp duty costs, finance costs and CGT incurred may well cost more than you are paying in land tax?
     
  5. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Yes, but you can only do this twice before you get classified as related companies and get aggregated
     
  6. Big Will

    Big Will Well-Known Member

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    My understanding is yes..

    Land tax | Office of State Revenue

    Extracts;

    A company is assessed in the same way as a sole owner unless it is related to another company

    For land tax purposes, trusts can be divided into six categories:

    • special trusts
    • fixed trusts
    • superannuation trusts
    • trusts created by a will
    • concessional trusts
    • charitable trusts
    A special trust is a trust where the trustee is the only person who meets the definition of ‘owner’ for land tax purposes, and the beneficiaries are not considered to be owners. If a trust does not meet one of the following trust definitions, it is a special trust. Examples of special trusts include most family trusts, discretionary trusts, some unit trusts and some trusts created by a will.

    The land tax threshold does not apply to special trusts, which are taxed at a flat rate of 1.6 per cent for amounts up to the premium land tax threshold and then at 2 per cent thereafter.

    The following trusts receive the land tax threshold:

    A fixed trust is a trust where the beneficiaries are considered to be owners of the land at the taxing date of midnight 31 December. This is because they are presently entitled to the income and capital of the trust and these entitlements cannot be varied by the trustee in any way. Fixed trusts include some unit trusts and bare trusts.


    Seek your own qualified advice.
     
  7. Lacrim

    Lacrim Well-Known Member

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    That's what I'm doing. Land tax in NSW is a massive rort.
     
  8. Simon Hampel

    Simon Hampel Founder Staff Member

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    ... and there are calls to reduce stamp duties and replace them with more land taxes :eek:
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No, trusts don't (except for some limited cases).

    But companies are a separate legal person and so can get their own land tax threshold. Related companies are aggregated and may be considered part of a group and get just 1 threshold.
     
  10. Simon Hampel

    Simon Hampel Founder Staff Member

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    How do they define "related" ?
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Related companies is defined at s29 of the land tax management act
    basically
    If one company owns another, or
    if the some person or persons hold a controlling interest

    Controlling interests is defined at being able to control the board of directors or the voting power. So basically own 50% or more shares - but it could be less as well.

    A possible way to extend the land tax threshold is for spouse A to control company A and spouse B to control company B.

    Thereafter it becomes difficult.

    The law also states that the Commissioner MAY aggregate related companies - note that it doesn't say WILL.

    It may also be possible to structure subsequent companies so that spouse A or B doesn't have a controlling interest.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  13. Lacrim

    Lacrim Well-Known Member

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    Why am I not surprised. At least that would artificially inflate the market semi permanently (for those holding props in NSW).
     
  14. dabbler

    dabbler Well-Known Member

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    Yeah, mad.....better to only pay once not ongoing on an increasing scale. When you call for new taxes & get them, the old ones seem to stick around....for good measure :)

    To the OP....

    Basically sell, or keep paying, or transfer.....

    If selling you could re invest in lower land value properties like units, and or spread the investments among states. Or buy some high income low land value regionals
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Selling to a related entity could allow for debt recycling as well.