We are in the process of buying our 2nd IP and I want to ensure we structure the purchase to MINIMISE land tax. If the first IP is in my husbands name and the 2nd IP is in joint names are the 2 properties assessed separately for Land Tax?
Melb
Hi Melb,
Land Tax is a state levied tax and as such the best place for information is the OSR (or whatever it is called by the state in which the property is located).
There are various rules for the different states and as such they are in the best position to answer the query.
For example – simple adjustments of tenants in common arrangements in some states creates a new partnership whereas in others it is treated as being the same.
Without knowing where your properties are located the answers will only be supposition.
Derek
[email protected]Property investment advice and researched property in quality locations available.
Land tax is a progressive tax – the more land you hold the greater the percentage. There is also a threshold where no tax is payable up to a certain limit. You had better find out what these are in your state and plan accordingly.
After a few properties, you may consider setting up a trust. These will have to pay land tax from $1 value (ie no tax free threshold), but you can then keep setting up new ones for future property to keep the tax in the lower threshold
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Just bear in mind that with trusts, in nSW, they are taxable from $1 in land value, but the rate of tax is the maximum rate of tax, ie there is no tax saving from multiple trusts although there might be other benefits eg asset protection
Thank you everyone for your feedback. We will be certain to take this into account before we structure our next purchase.
Melb
I had read a previous thread that claimed that if you did joint ventures with percentage interests at 50/50 then 51/49 then 52/48 then you somehow managed to dodge the higher land tax rates.
I went to the vic SRO website and checked out the section on calculating land tax for joint ventures. And got bogged down in their Algebra.
I could not work out if you have to pay land tax for the whole property each OR pay for your portion and add that to your total land tax bill OR get the low rate of land tax calculated separately for each new joint venture property at a different % interest??????????
Who is smart enough to explain this….. (the challenge has been set!)
Live, Learn and GrowLifexperience
Hi LifeX,
Stamp duty legislation and rules do vary from state to state. In some states varying the partnership percentages as per you example makes no difference to threshold ‘avoidance’ as each partnership (even though the percentages may be different) will be considered the same.
Other states (and I don’t have the information here) will see the different ownership portions as being a different partnership.
As for who claims what – each patch of land is levied and is marked on your land tax bill (ours are anyway) so at the end of the financial year we can apportion shares of the bill for each property consistent with the ownership portions.
Eg land tax bill $200 (50/50) claim= $100 each. A bill for $200 (60/40) one perosn claims $120 and the other $80.
Now for the disclaimer – I am not an accoutant but did pass leaving economics and can balance my cheque book [biggrin]
Derek
[email protected]Property investment advice and researched property in quality locations available.
How do I check the value of the land (without the house I presume) ?
This will help to decide on IPs if I want to avoid / delay Land Tax bracket creep.
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