Legal Tip 28: Land Tax and Property Ownership

Discussion in 'Legal Issues' started by Terry_w, 16th Jul, 2015.

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  1. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

    18th Jun, 2015
    Land Tax and Property Ownership

    Perhaps land tax is the most important thing to consider when deciding how to own the next property.

    Get it wrong and it can cost you dearly. I had a client whose accountant suggested they use a discretionary trust in NSW to own property - he didn’t mention land tax at all and the clients are now stuck with paying $6,400 per year in land tax for every year they own the property. Imagine how this could delay the paying off the non deductible loan on the main residence.

    Each state has different land tax rules so you can only plan the purchase once you know which state you will be purchasing in. Once you know that then ascertain the land value of the proposed property. Consider the effect of increasing land prices and how the land tax thresholds for that state change each year. Some states such as QLD have a threshold which doesn’t move. Other states such as NSW increase the threshold with the CPI each year. So a property with land value of $580k in QLD may not be over the $600k threshold this year, but could next year if it increases in value slightly.

    Once you have done all this you can plan ownership so as to avoid or minimise the land tax rates. Keep in mind that land tax is not the only thing to consider but it must be tied in with the many other things to consider when deciding ownership - stamp duty, income tax, asset protection, control, death, incapacity, bankruptcy etc etc.
    bonanzawealth and DanW like this.
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

    18th Jun, 2015
    The accountants and lawyers who still suggest a DT, hybrid trust in many forms or a non-fixed unit trust astound me. There are still huge numbers of people with problem trusts that could fix the concern but blindly think it cant be fixed.

    And all of them potential slam the door shut on a long term plan to use super one day to invest in property.
    DanW likes this.