Forums / Getting Technical / Legal & Accounting / Land Tax – Arrhhh

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  • Profile photo of vyaw2003vyaw2003
    Participant
    @vyaw2003
    Join Date: 2006
    Post Count: 180

    Hello,
    My long term plan was to fully own 4+ houses outright, move out of one of these, relocate to Asia and live comfortably off rent $2,400/w. Unfortunately I had not taken into account Principle Place of residence and land tax.
    What is the most economical way to get around this issue.
    If I rent out the house I am in now, it was cost me an additional $6k in land tax. But I want to live in Australia more than 50% of the time so I am paying the lower tax bracket. So for 5.5 months, do I just leave the house empty??

    Seems like I didn’t really think this through 8 years ago as land tax was not an issue when I only owned a few units.

    Perhaps I should sell a house and buy, Big 4 Bank shares, and live off those dividends?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,058

    what states are the properties in? Hopefully not QLD!

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of vyaw2003vyaw2003
    Participant
    @vyaw2003
    Join Date: 2006
    Post Count: 180
    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,058

    Well your early retirement has probably been derailed now

    You need to look at the definition of ‘absentee’ in the land tax act and try to make sure you don’t meet this as your land tax bill will go through the roof.

    Absentees are taxed like trusts. the threshold drops from $600,000 to $350,000, the rate is higher plus there is a surcharge on top 1.5% pa of land value

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of vyaw2003vyaw2003
    Participant
    @vyaw2003
    Join Date: 2006
    Post Count: 180

    nice tip, under 6 months, that fits with our plans, so we would have to rent the house for a maximum of 5 months per year. And we can live in it for the remaining 7 months of each year?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,058

    There are 2 aspects to consider
    a) making the property your PPOR for land tax – which requires you to live in it for 6 months prior to the assessment date -30 Jun I think, so you would need to move in by 30 Dec and live there continuously

    b) The absentee person test, probably won’t apply if you are living in the property for 6 months as that will mean you are in Australia and unlikely to be an absentee

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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