Land Tax is a state impost and different states have different rules and thresholds. For every property investor Land Tax represents a significant cost to owning an investment property and you should always consider the impact of Land Tax when acquiring your next investment property. Here are five ways you can minimise land tax:
1. Purchase the property in the name of the person that hasn’t used the respective state’s threshold. For example, in a husband and wife ownership scenario, if the husband already has a property in his name - excluding your Principal Place of Residence (PPOR) - and has used up the threshold in that state, consider acquiring in the wife’s name to absorb a new threshold.
2. Consider an apartment. Apartments generally have a lower land component than houses therefore you should check the land component of the investment to determine whether you have reached the respective thresholds. You could potentially own a number of apartments before hitting the thresholds in some states.
3. Use a separate Entity like a Fixed Trust or company that entitles you to a separate threshold on each property. However, before acquiring the investment in these structures seek independent tax advice as tax treatment could be different than acquiring in your own name and each state has different rules for entities.
4. Consider the timing of sales and purchase on land and the Date of Assessment for Land Tax in a particular state. For example, if you are selling a property, ensure that you settle prior to the Land Tax assessment anniversary. If you are selling property just be mindful that you may still be obliged to pay the Land Tax for the following year if you have not settled before this date.
5. Acquire properties in several states. If all properties were owned in the one state, let’s say NSW, you would normally exceed the Land Tax threshold. If however you spread your investment properties over a number of states then there would be less Land Tax to pay.
This is general information, please seek tax advice from a specialist accountant who understands the complexity of Land Tax in different states for your specific circumstances.
