CAN YOU AVOID PAYING LAND TAX?
Can you avoid paying land tax? No, not really…unless you stop buying properties.
So, should you stop you buying investment properties to avoid paying tax? Hell, no.
Here’s what you should know about property investment and land tax.
YOU PROBABLY WON’T PAY TAX AT FIRST…
Unless you are buying a large, high-value block of land as investments, you probably won’t be paying land tax on your first property.
For some reason, so many small investors freak out about tax so much, they never buy another property.
That just doesn’t make sense!
DIFFERENT STATES HAVE DIFFERENT RULES
Generally, land tax only kicks in after you have reached a certain land value threshold within a particular state.
For instance, in Queensland, a land tax threshold applies to properties that are bought under a trust. In NSW, however, there is no threshold for purchasing under a trust.
If you can align your strategy with these land tax loopholes, you could avoid paying it for a little longer.
SPREADING YOUR PORTFOLIO FAR AND WIDE?
While it can be good to diversify your investments across different states, doing it just to avoid paying land tax is misguided…always put strategy first.
Nathan says he has bought in many different locations, but he did it because he saw great potential in growth and was able to get a kick-ass deal, that fitted his goals and strategy.
He didn’t do it to try and save money on land tax.
APARTMENTS OVER HOUSES?
It is possible to buy several apartments and still sit beneath the land tax threshold. This is because they contain a smaller proportion of land under the title.
If you had bought a few houses in Sydney 10 years ago, it is likely you would be starting to pay land tax on them.
If you had purchased several apartments in Sydney, however, then you may not have started paying land tax yet.
TAX IS JUST A COST OF BUSINESS
All in all, land tax is just a cost of business.
Why would you turn down buying a property that could make $200,000 in three years just because you didn’t want to divert few grand of your rental income to tax?
Say, you had several investment properties in Sydney that had surged in value during the current boom. You may be paying $5,000 a year on land tax, but the money that you have made from these purchases will have far outweighed this cost.
Nathan says he pays hundreds of thousands each year in land tax. He doesn’t like it, but it is just the way the system works.
He has purchased properties in a way that means he is making way more in profit and passive income than what he is paying in tax.
GET A GOOD ACCOUNTANT
It is essential to have a good accountant. They can help you minimise your overall taxation costs by applying the different rules and exemptions that may be available to you.
YOU PAY TAX ON EVERYTHING YOU DO
Tax is just a fact of this economy – there is no point being a tight ass. Pay your tax, but make sure you invest in the right kinds of properties so you can make a killing in profit.
How much land tax do you pay each year? Please share your experiences in the comments section below.