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Land tax

Discussion in 'Accounting & Tax' started by dan2101, 21st Sep, 2015.

  1. dan2101

    dan2101 Well-Known Member

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    Hey all,

    I've currently got one house in Brisbane and 2 in rockhanptom. My inderstaanding is the land tax threshold in qld is 600k.

    Looking to purchase one more house on Brisbane which will push me over the threshold by about 200-300k this having to pay land tax.

    If I start up a trust account with myself as the trustee will I avoid land tax or am I better to just suck it up and pay the tax? Already have a trust set up
    With my brothers through terry w but want to keep them out of the equation on this one.

    Thanks

    Dan
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Hiya,

    Refer the govt website is best idea. https://www.osr.qld.gov.au/land-tax/about-land-tax/land-tax-rates.shtml Humans has $599,999 threshold and trusts have $349,999 threshold.

    What do you mean with your brothers do, for your existing ones or for the one you're thinking of buying? You can then apportion the ownership accordingly which means your tally might be less than you think.

    The trust would then also have to do a tax return each year (accountant's fees). You'd also need to borrow to buy the place in a trust so your broker needs to be across that.
     
    Last edited: 21st Sep, 2015
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Keep in mind there's costs involved in setting up and maintaining trusts. This could be more than the cost of the land tax.

    There's no simple answer for which way is more cost effective, it depends on what you already own and what you're purchasing, vs the costs involved in the trust. It needs to be figured out on a case by case basis.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sometimes when people say "I" they mean something else. If you own with spouse you each would have a threshold, but if you own on your own, not as trustee and are a resident then yes t would be $600k
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you are owning land as trustee you will be separately assessed to the other properties. Work out what the land tax would be on the property in your own name and then compare this with the cost to set up and run a trust.

    then consider all the other aspects as well..
     
  6. dan2101

    dan2101 Well-Known Member

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    So the 3 existing properties I own in qld are under my name only and I have no spouse.

    Current land value is at 516k.

    I'm thinking the land value of my next purchase will be approx 300k. Thus I will be paying land tax on the amount over 600k which is 216k.

    So using the formula of

    $500 + 1 cent for every dollar over $600k I will pay $2660 land tax every year (which will obviously only increase as property prices increase).

    So I guess what I'm trying to figure out is what is the approximate cost to:

    A) set up the trust to purchase the next property

    And

    B) the ongoing yearly costs approx.

    This should hopefully make my decision for me!

    Thanks for the help guys.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Cost of a trust would be about $1650 with legal advice. Ongoing fees nil to a few hundred per year.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Depends upon your intention of creating the trust too. If you are the trustee is it providing any asset protection or only to minimise land tax? Do you require a corporate trustee? This will involve additional costs.
     
  9. dan2101

    dan2101 Well-Known Member

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    Thanks terry.
    Hey Scott the main purpose would be to avoid paying land tax. I assume I would be the trustee.

    What do you mean by asset protection? Is this to do with getting married then divorced and not losing my assets?
     
  10. dan2101

    dan2101 Well-Known Member

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    Just one more question - if you live in a property for a period of time as your principal place of residence and then tenant the property is the property exempt from going towards the land tax threshold for the (6?) year period that it remains considered your PPOR?
     
  11. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Some other problems with trusts owning QLD property:
    - Stamp duty applies to changes to the trust or the unitholders in a unit trust unlike other states
    - Main Residence exemption can never be obtained
    - No 6 year absence rule
    - Costs as prev mentioned (startup + ongoing)...I would think $700 extra a year plus a fair comparison.
    - Problems with lending - Unit trusts and disc trust will face issues.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No. The land tax rules are completely different to the income tax rules and vary from state to state.
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    eg : In QLD when a person becomes a non-resident the threshold changes to that of a "alien" absentee. Form LT16 must be completed and penalties can be imposed. OSR QLD do checks with DFAT on people who leave Australia and who rent their former home. Its a money maker. The ATO rule for residency is NOT same as OSR rule for leaving Australia you will note. The dates, timing and rules vary considerably.

    In NSW special rules determine if there is a continued exemption and for how long (depends on if its rented and the basis of rental) and so on. Its complex tax advice.
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Depends if you meet all the absence rules. This can mean they look at who you live with too. Live with your "partner" in their place and you (both ?) may have a problem. Where you live for the 6 years needs to be considered. For land tax rules are different.