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  • Avatar of PEACHYPEACHY
    Member
    @PEACHY
    Post count: 78

    Hi all!

    We have just been hit up for a $40 per week increase in rent. Needless to say we are a bit stressed about it!

    Anyway the reason stated for the increase was "mainly due to increases in the cost of land tax". I questioned this and again was told the same thing. I don't understand as I was always under the impression that units were not subject to land tax?? Also why don't we have to pay land tax on our unit? Or is it structured into the strata levys? I am confused.

    At the end of the day they are increasing the rent because they can, which sucks, because we are nice landlords and not taking advantage of our tenant…maybe I need to learn to be mean!

    Thanks for your help,
    Peach

    Avatar of Scott No MatesScott No Mates
    Participant
    @Scott-No-Mates
    Post count: 3,786

    Peachy, you have 3 options as a tenant: 1) Move (if your lease has expired) 2) Accept the increase or 3) Fight it ie: dispute the increase if it is exhorbitant, eg more than 10%

    Avatar of Richard TaylorRichard Taylor
    Participant
    @Qlds007
    Post count: 11,205

    Peach

    Land tax is charged on all property holdings subject to certain thresholds.

    These may include the occupancy i.e whether you hold it as a principal place of residence, investment etc, the name or entity in which the property is held. the State in which the property is held and the number of properties held in your portfolio.

    In a nutshell it will vary from owner to owner.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
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    Broker specialising in Investor Loans. Request a copy of my API interview 0-40 properties in 10 yrs

    Avatar of kalonikaloni
    Member
    @kaloni
    Post count: 124

    Hi Peachy
    as far as I know a landlord can not
    make a residential tenant pay for their land tax
    $ 40per week  means the property if you live in Victoria
    is worth neaarly $800k

    check here
    http://www.sro.vic.gov.au/sro/srowebsite.nsf/lt/BFBC6D231B529FF1CA2573F7003A09D5?EditDocument&#calc

    Avatar of Richard TaylorRichard Taylor
    Participant
    @Qlds007
    Post count: 11,205

    I dont think it is a matter of the Landlord using the rental increase as an excuse on his increased land tax however with the current rental climate being what it is a landlord can increase the rent without any excuse and long as this is considered a fair increase the tenant has 2 choices.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
    Email Me | Phone Me

    Broker specialising in Investor Loans. Request a copy of my API interview 0-40 properties in 10 yrs

    Avatar of PEACHYPEACHY
    Member
    @PEACHY
    Post count: 78

    ok so my post may have been a bit confusing…

    1. We are aware that at the end of the day we have to accept the increase or move as I have already tried to reason with them – having said that we were anticipating a rise, just very disappointed that they would increase it by so much in one hit when we already had a $20 per week increase last year and have been good long term tenants, painted the place etc and never ask for anything even though it is in poor condition (except for our professional paint job!).

    2. We have just purchased our own property in Nov 07. What I am confused about is if they are saying that units are subject to land tax then why are we not having to pay it? Our unit cost $510000 and is in NSW? Are these costs incorporated into the strata levis or should I expect some hideous land tax bill some time soon? I must have missed that one in my years of reading about property before finally being able jump into the market!??

    Thanks for all your comments!
    Peach

    Avatar of PEACHYPEACHY
    Member
    @PEACHY
    Post count: 78

    Oh just to add…

    the unit we own is investment and in the same suburb as the one we rent. Our rental would be estimated to be worth approx $370-400k and the rental increase is exhorbitant (I think) at approximately 14% in one hit.

    Avatar of Scott No MatesScott No Mates
    Participant
    @Scott-No-Mates
    Post count: 3,786

    Land tax is levied on all combined holdings above $359k (with a limited  exception for your PPOR) refer: http://www.osr.nsw.gov.au/taxes/land/rates/. Cost and land content are two different things. Have your registered for land tax? (there may be penalties involved if you haven't). Review the budget for the body corporate's sinking and operational funds to see if they pay land tax or query the strata manager.

    14% would be unreasonable, refer to Option 1 or 3, don't just accept it, especially if it is $60 over 2 years (if they think that you will wear it, they will do it again next year and the rent will be so far above market it will be hard to re-lease at that level).

    Avatar of Zoe JonesZoe Jones
    Member
    @Zoe-Jones
    Post count: 47

    Dear Peach,
    i do understand your frustrations, are you in Sydney? I got hit with a big land tax bill, because the NSW government overvalues to raise revenue. So the value of the land that is part of the complex for my studio apartment is actually SUBSTANTIALLY GREATER than what I can sell the studio for, belivee it or not. I fought it all the way with the valuer's department, saying how about they buy it if that is land value only and they can get a unit with it for the same price.  Now that it is a landlord's market out there and the landlord can raise the rent to try and recoup the cost (rather than say cancelling his annual holiday or car, which is what some of us were doing a few years ago) of course they will do that, and you will end up paying it, and if not you, then someone else. The unit will only ever be worth market value, so if this raises rent above that why not move to somewhere cheaper.

    Avatar of TerrywTerryw
    Participant
    @Terryw
    Post count: 14,596

    The land value of a unit is relatively small (because many units sharing the one block of land), so Peachy is probably under the threshold.

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    Avatar of Zoe JonesZoe Jones
    Member
    @Zoe-Jones
    Post count: 47

    In regards to my earlier comment re unfair land tax, my unit was a studio apartment, and the land value was increased by 33% in one year. When I bought I considered the land value, and figured I would be under thethreshold for years to come, however it is impossible dealing with the greedy NSW state government and their totally unreasonable valluations. Every owner in the block protested, as our block of land was valued at close to 3 million for land tax, yet the block of land next door, same size, had sold for under 1 million in the same period.  There is no way we could have sold our land for that value. Yet we paid the tax based on that. All I'm trying to say is with the land tax there seems to be no reason applied in the valuation process, and as such maybe even Peachy's  landlord has been caught out as well. Something worth asking in that case is for a copy of the valuation. I have a friend renting in Manly in Sydney, she had a similar situation, her rent went up by $50 twice in a couple of months. The lanldord actually provided her with a copy of the land tax to show her that he was struggling himself, and the landtax had increased by some phenomenal amount in the space of a year, and it was obvious that it would be some strugge to come up with another $10,000 or so compared to the previous year. And he asked her if she was prepared to help with increased rent, and otherwise he would sell the property. they actually had a coffee together and discussed it, and she choose to stay on, and he will sell when she does move out.

    Avatar of neilvsneilvs
    Member
    @neilvs
    Post count: 36

    The owners should challenge the 'valuation' by the state government in court …

    The fact that a neighbouring block of land sold for a third of the price during that same period would mean a certain win of their case.

    It's about time the people took on the greedy government. It's an attack on property owners' rights…  it amounts to legalised theft!

    Avatar of superhoopssuperhoops
    Member
    @superhoops
    Post count: 15

    Zoe,
    How many units are in the complex of you IP?

    I own an IP apartment in Stanmore and the Gross Land value is $50,140. There are 24 units in the complex, therefore I am assuming that the overall land value is $50,140 x 24 units which totals approx $1,203,000. Not sure if this is correct as each of the apartments may have a different overall land value.

    cheers
    Superhoops

    Avatar of Zoe JonesZoe Jones
    Member
    @Zoe-Jones
    Post count: 47

    There are 12 in the complex I mentioned, which means that each owner gets slugged with 3 million divided by 12 as they are all the same size  (under 50 metres, can't even get bank finance without dramas). It's just bizarre really. Just looked at today's paper and saw land tax again the headline story (see my next posting in same forum). My studio is on the north shore, but see from local paper it is now also big issue in eastern suburbs. It means property investors shy away, because there is no rhyme or reason to these land tax valuations, and it means you are better off to rent!

    Avatar of superhoopssuperhoops
    Member
    @superhoops
    Post count: 15

    Zoe,
    Based on your figures your unit has a Gross Land Value of $250K. Therefore if you had this as your only IP then you would not be up for any land tax as it is below the $359K threshold. However, I am assuming that you have at least a couple of IP's that push your combined land values above the $359K threshold. I am just trying to get around the Land Tax issue so forgive me if I am wrong – thus back on Peachy's OP there probably isn't any land tax per se on the unit that Peachy is renting, however as their landlord may have more than one IP it is the combined total "that has increased that landlords land tax" – whilst rental increases are not unreasonable, it is deceptive conduct in a way for the landlord to suggest that the increase in rent is due to land tax on that unit.

    Superhoops

    Avatar of Zoe JonesZoe Jones
    Member
    @Zoe-Jones
    Post count: 47

    I di have several, and I bet you peachy's landlord has several IP's as well, I guess what I was just trying to point out is that land tax does not reflect the actual values anymore, and with it going up 30% each year it is something you never planned for in your investment strategy, I mean where are the articles in investment magazines dealing with it? They never mention it really. I have yet to see an article that addresses the risk of land tax with your portfolio. One year you are nowhere near the threshold, the next year you are way over it, and even though your properties have not gone up in value, you are forced to sell, and I guess now more people are selling, others can put the rents up as there are less properties to go round.

    Avatar of Scott No MatesScott No Mates
    Participant
    @Scott-No-Mates
    Post count: 3,786

    ZJ, LV does not reflect values it is used for statory ratings puposes. They do not go up by "30% each year" this is BS! The VG undertakes its valuation cycle on a 3 year basis (or 4 years in rural districts) with minor adjustments annually. If you can cite the addresses of 2 such sites which have increased at this rate I'll buy you a beer (and a hanky). Land tax is then levied on the average LV for the previous 3 years (2 years of which are not published but can be found on the OSR website).

    If you are forced to sell as you are so precariously financed – should you not take a less risky approach to investment if you cannot afford a $5k land tax bill (after all it is tax deductible)?

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