Tax Tips

If you felt that your land tax bill skyrocketed in the 2014/2015 income year you would be right. This is because the overall value of residential land has increased by 22 per cent. What's interesting is how much the rates of land tax vary by state. If the land value of your investment property is $1 million then the land tax you need to pay for the 2016 financial year is $8,388 in NSW, but in the ACT it is $11,292 and in Victoria it is only $2,975.

Property investors can claim land tax as a deduction but it's always wise to minimise the amount of tax you pay, so it's a good idea to do some planning before you purchase your next property.

Here are three tips to reduce your land tax bill:

1. Spread the investment properties across different states
   
   For example, if you have a portfolio of three properties in NSW with a total land value of $1.5 million, you will pay $16,388 land tax every year. However if you spread the properties across different states in NSW, Victoria and Queensland, you will only pay $1,163. A saving of $15,225 every year.
   
   
2. Purchase the properties in different entities
   
   A couple can buy four properties with only one joint name. One partner can own one, and the other partner owns another. And perhaps the fourth can be owned by a self-managed super fund. For example, in NSW if one person holds three properties under his own name, the land tax bill is $16,388. However if spread over three different persons or entities, it would cost $1,164 only.
   
   
3. Invest in apartments rather than houses
   
   A unit usually has a much lower land value than a house. On the other hand a unit needs to pay body corporate fees (strata levy) which a house doesn't need to pay it. Before purchasing a property look at the complete picture of long-term capital growth and the annual costs of land tax, body corporate fees, strata fees, etc.

 TaxGo is happy to help work with you and look at how to best manage your investments to minimise the amount of land tax you need to pay.