Sounds very late in the piece like Terryw says.

For best results you should discuss your plans with your accountant, lawyer, & broker before executing.

Get prepared and organised for your next deal, paying stamp duty once is bad enough!

Holding your property portfolio in multiple trusts can reduce your overall land tax bill.

In WA trusts are usually assessed for land tax on the WA property owned within the trust (and is not aggregated with land you hold in your own name).

With WA land tax the first $300,000 of land has a nil rate of land tax. Greater than $300k to $1M you pay 0.09%, $1M to $2.2M you pay 0.47% and so on…

So for example if you hold two properties in your name, each with land value of $500k each, you pay $630 in WA land tax based on $1M land value.

Now hold two properties, one in your name and one in a trust, both with land value of $500k each. You pay $360 in WA land tax based on $500k in your name ($180 land tax) and $500k in the trust ($180 land tax). So you save $270 per annum in land tax with a trust in this situation.

As your portfolio grows (hopefully into the millions) you can realise significant land tax savings if you structure your portfolio correctly, either by using multiple trusts and or investing in multiple states.

Always discuss land tax with your accountant or lawyer first, it differs significantly from state to state. I try stick to SA, which is similar to WA. As soon as I leave SA I like to dust off the books and ring the state Revenue office to confirm. Also the trust deeds need to be set up correctly.

NSW seems to be the devilish state when it comes to land tax planning as trusts generally don't receive a tax free threshold there. However, Macquarie Group Services seems to offer a NSW Land Unit Trust, which they claim receives a land tax free threshold. They only deal with accounting and legal professionals, but maybe get your accountant to look into it if you have a large portfolio in NSW. (I don't have any affiliations, I just hate land tax).

Also, when considering trusts you should consider the asset protection provided (or lack thereof) as well as any tax planning benefits.

Hope this adds value

Cheers

Richard

Make sure you are undertaking the subdivision to realise the best capital value for the land rather than as a profit making undertaking. If you subdivide with the intention to make profit you don't make a capital gain, instead you make a revenue gain which you need to pay GST on.

Hold the land for 12 months to claim the 50% CGT discount (individuals and trusts only).

Keep good records of all the costs associated with the subdivision to add to the cost base of the land.

Hi Steve,

I had a couple of thoughts about your situation.

What entity does your business trade and operate in? If you are trading in a trust you might be able to do something more tax effective with your $80k profit each year. Possibly distribute the profit to a company which can lend it back to the business with interest. In this way you only pay 30% tax on the $80k profit rather than the highest tax rate for individuals of 45%.

Purchasing an IO might knock you out as a first home buyer so you might miss out on the FHOGs if you buy a PPOR later. Check your state and federal rules.

Check with your accountant before taking money out of the business to place in your offset account. Depending upon your setup there could be issues.

Hope these points add value.

Cheers

Richard

Having trouble sleeping? Read a tax ruling

GSTR 2003/3 – Goods and services tax: when is a sale of real property a sale of new residential premises

http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20033/NAT/ATO/00001

EXTRACT:

Criteria for substantial renovations

60. Whether renovations are substantial is to be determined in the light of all the facts and circumstances.

61. We consider that for substantial renovations to occur for the purposes of the GST Act, the renovations need to satisfy the following criteria before it is necessary to make further inquiry to establish whether the renovations are substantial:

    (i)

          the renovations need to affect the building as a whole; and

    (ii)

          the renovations need to result in the removal or replacement of all or substantially all of the building.

62. Where one of the above criteria is not satisfied substantial renovations have not occurred and no further inquiry needs to be made.

Substantial renovations need to affect the building as a whole

63. Under this heading we discuss the concept of a building in its entirety, works on surrounding land (for example, curtilage) and additions to the building.

Building in its entirety

64. Whether substantial renovations have occurred should be based on consideration of the building in its entirety, that is the building as a whole, and not by reference to specific or individual rooms in the building. For renovations to be substantial they must directly affect most rooms in a building. The renovation of only one part of a building, without any work on the remaining parts of the building, would not constitute substantial renovations.

65. For example, the owner of a large 4 bedroom house removes the wall between two bedrooms for the purpose of creating a large bedroom with ensuite. The former door to one of the bedrooms is removed and replaced with gyprock so that the newly created larger bedroom can only be entered by one doorway. The room is repainted and recarpeted. Although significant, the work does not constitute substantial renovations as only one area of the house is affected.

Definitely talk to your accountant. On the face of it, looks to be capital in nature.

Thanks for the info Lilian.

I was just referring to the original poster Astroboy71

http://www.businessspectator.com.au/bs.nsf/Article/BHP-wont-proceed-with-Olympic-Dam-expansion-pd20120822-XE94U?opendocument&src=idp

I think it is a real blow for SA. The expansion was an enormous amount of activity for SA. Personally I am not changing my investment plans, I just think we'll miss out on a Perth / WA like boom, at least for the time being.

If someone was speculating on land in SA to go through the roof due to Olympic dam they might have to wait a while longer yet.