Staying under each States Land-Tax-Free threshold
Buying a diversified property portfolio Property investment in Australia need not be a complicated process. While investing is relatively simple, the larger your portfolio becomes, the more complex the taxation rules and regulations become. What with capital gains tax, stamp duty and other costs, property tax can get out of control if you don’t develop a good understanding of the different applicable taxes. There are ways in which you can diversify your portfolio without being penalised by the Federal & States governments, however, and one such method is understanding the land tax-free threshold for each state in which you own property–and even the ones you do not.
What is a Land Tax?
Land tax is the amount charged by the state government for land you own to pay for the general upkeep of the area and council facilities. It is calculated at different rates from state to state, on the combined value of all the taxable land you own. In some states principle places of residence are exempt.
What is the Land Tax Threshold
This threshold varies from state to state, but if the value of the combined taxable land you own is less than the threshold, you are exempt from land tax in that state. It is important to note that the land tax of the state is only applied to land you own within that state, and land you might own in other states will be taxed according to that state’s taxation regulations. In some states, land tax is not charged on your principle place of residence, and it is also not charged under a certain threshold.
What are the Land Tax Thresholds For Each State?
The land tax in each state can increase each year to account for rising property value, but the current (as at June, 2011) land tax threshold for each state is as follows:
NSW: $387,000 (principle residence exempt)
QLD: $349,000 for companies and trustees, $599,000 for individuals (Principal place of residence exempt if that person does not own any other land in the state of QLD)
ACT: $75,000
WA: $300,000
SA: $300,000
VIC: $250,000
NT: No land tax in the Northern Territory
TAS $25,000
How to Work Each Threshold To Your Advantage
It is clear from the numbers above that the state in which you choose to buy your investment property could greatly impact your tax liability. Buying two properties in NSW would probably put you over the threshold and ensure you were liable for Land Tax each year. If you were to buy a property under the threshold in NSW, however, and then invest the same amount in QLD and then again in the Northern Territory, you would own three investment properties , none of which you would be liable to pay land tax on. Diversifying your properties is a very smart way to reduce tax liability.