Land Tax is going to hurt unless..
Land tax has people screaming murder. For good reason too. It’s pricey. A kick in the guts can’t feel good, right? Painful if not done right. Even you are all SMSF’ed up, with more tax planning than Packer? You never know. Besides you don’t know what you don’t know. So, best read up. Just in case your accountant missed something. It is something you should be very aware of if property even is kind of your thing.
So here’s the deal Down Under: pretty much every place in Australia hits you with land tax. Except for the Northern Territory – they’re the rebels in this tax game. And each spot has its own set of rules for how much they’ll tax you and when they’ll cut you some slack (if you’ve got a cozy house you actually live in).
(Some property gurus advise to buy in multiple states so that you don’t always lose out – as it seems the situation just gets worse and worse as the government gets hungrier and hungrier for your money. So we cover that too below)
When does Land Tax hit you?
So, in a nutshell, you’ll get slapped with land tax if you’ve got:
A piece of empty land just sitting there,
Some real estate you’re renting out for investment,
A fancy commercial property, or
A sweet vacation pad.
But here’s the kicker: they’re going to look at all your non-exempt land and add up their values, and that’s what they’re going to tax you on. So, if you’re the proud owner of a few non-exempt properties, you’ll be forking over taxes based on the total worth of your real estate collection of goodies, following the rules of your particular state or territory.
Now, here’s the good news: there are some legit ways to play the land tax game and reduce your bill.
Check out these five strategies to help you out.
Thinking about buying a place in Australia? Consider snagging yourself an apartment in a fancy multi-residential building instead of a standalone house. Why? Well, here’s the scoop: apartments usually come with a lighter land tax burden compared to the big chunk of land under a house.
Why’s that, you ask? It’s simple. Your piece of the pie in a swanky apartment complex is likely to be worth less than a whole piece of land. So, when it’s tax time, you’ll only be on the hook for the land tax related to your apartment’s share of the entire complex’s land, not the whole shebang
More than 1 state – like we mentioned before
Here’s a nifty trick for all you property buyers in Australia – spread your investments across different states and territories. Why? Because each of them has its own set of rules when it comes to land tax, and you can score some sweet deals.
For instance, let’s take a look at Victoria. Right now, they won’t bother you with land tax if your property is worth less than $250,000. Which is nothing, though. Meanwhile, in sunny Queensland, you can breathe easy if your land’s value stays under $600,000. And if you decide to go big in the Northern Territory, guess what? You won’t be shelling out any land tax at all. So, pick your spots wisely!
(Speaking of which – this is one of the most complex decisions you will ever make. Which one? Well, pretty much anything that deals with property. So, ensure you have your army of property and tax specialists before getting yourself mired in this Aussie landscape. It is very dangerous. All the advice online cannot help. Even ours. It can only make you aware of what you should enquire about. Don’t just read these blog posts and think you can make the right decision. You can’t)
Let’s talk some more about some potentially savvy moves when it comes to buying property and dodging those land tax bullets:
Put the property in your partner’s name: Land tax is a bill that lands on the owner’s doorstep. So, if your partner hasn’t maxed out their tax-free land threshold, consider sliding that property into their name – either entirely or together. It can save you some serious cash.
Trust the process: Another option is to maybe set up a few trusts strategically (with bucket companies etc) or maybe even a few tax structures to grab some non-exempt land. But, here’s the thing, setting up and managing a trust can get a bit pricey. So, whether it’s worth the cost depends on how much you’ll be shaving off your land tax bill. It’s a good idea to get some pro advice on this one. Trusts can actually backfire here if not planned properly. Ever heard of the trust surcharge? Yes. THAT one.
Timing is everything when it comes to selling your property and dodging that venomous land tax hit. Here’s the deal: sell before they calculate your annual land tax bill. But here’s the catch, the date for this varies depending on where you are in Australia. In Victoria, it’s December 31st, while in sunny Queensland, it’s June 30th.
If you miss the boat and don’t sell by the due date, you’ll be on the hook for the full year’s land tax, no exceptions.
Now, if you want some pro help with all this land tax juggling, our tax-savvy team over at My Tax Guy has got your back. We’re all about legal tax minimization, not the shady stuff. Not even close. Because there’s no need for it when you are smart. And maybe, we’ve got other financial tricks up our sleeves that can help you in your race to your millions. We usually do.
Hit us up today for a no-strings-attached chat. Find out how we can give you a hand. Or not? And keep plodding blinding towards the precipice? Not you. If you’ve read this far you are too smart for that. So, reach out my smart friend & let us help you out because..
Land Tax is out to nail you. Time to get ahead of it all.