I want to tell you a quick story of a new client situation we often get (about once a month) that might be relevant to you.
Let’s call him Rod – I had a meeting with Rod regarding a serious tax issue last week. Over the last 5 years, he has been working really hard to build a property investment portfolio. He’s done a really great job of growing it to 7 properties under his belt and a majority of these properties are positively geared.
He was paying income tax on the rental profit every year. Now, you may think that isn’t really a serious tax issue. Well, it isn’t. It’s actually great because that means he’s making money on his properties. Also, there are ways to reduce income tax such as claiming property tax depreciation, something our good friends at Duotax can help with. However, it’s not the income tax that’s the serious tax issue.
It’s land tax.
Land tax or as we like to call it – “Forgotten Tax”. Believe it or not, this is the tax that most property owners do not know they need to pay before it’s too late. For example, in NSW, the land tax rate enforced is 1.6% of the assessed land value of the property that is over the threshold. So, assume you own land in NSW valued at $1,000,000. You could be up for land tax of $16,000 every year!
There are ways to reduce this tax if you structure your land ownership correctly. Such methods can include:
- Utilising the land tax-free threshold
- Spreading out the property ownership between different states in Australia
- Utilising concessions or exemptions for land tax (eg. Main residence or primary producer)
Unfortunately for Rod, as he owns 7 properties, his land tax bill was over $50,000! I know, that’s basically someone’s annual wage!
It’s important that when you purchase property that you speak to an accountant who you can trust and communicate with, so they can give you advice on structuring the property effectively. Unfortunately for Rod, though he spoke to an accountant, he didn’t get the right (or lack of) advice.
Also, even if you haven’t received a notice or letter regarding land tax, it doesn’t mean you won’t be hit by this tax. Most clients don’t see this bill until they’ve sold the property and when they do, they are hit with a land tax bill for every year they owned it! So imagine that.. $16,000 x 5 years = $80,000!
New Resources Page
As I said last month, the team has been working hard on designing and bringing to you a new resources page. I’m proud to say that it’s now live for your viewing pleasure! New features include five free and helpful eBooks, a videos section and now you can access all of our previous monthly newsletters in our news section. I hope this helps and feel free to send suggestions my way for anything you’d like to see. We’re constantly looking to improve!
Important Upcoming Dates
14th August: PAYG Withholding Annual Report Due
21st August: July Monthly BAS Due
26th August: June Quarter BAS Due (Tax Agent lodgement)
28th August: Taxable Payments Annual Report Due
28th August: June Quarter Super Guarantee Charge Statement Due
What’s Happening at Box AS
We’ve still got plenty of new and exciting content in the pipeline so continue to stay tuned through any of our social channels. In the upcoming months, Box AS will be aiming to engage closer to our local area and hopefully, you’ll start seeing not only see our faces online but also amongst the local community as well.