{"id":9642,"date":"2016-10-24T01:00:27","date_gmt":"2016-10-23T14:00:27","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=9642"},"modified":"2016-10-24T01:00:27","modified_gmt":"2016-10-23T14:00:27","slug":"land-tax-explained-ed-chan","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/land-tax-explained-ed-chan\/","title":{"rendered":"Land tax explained – Ed Chan"},"content":{"rendered":"

 
\nEd Chan<\/strong> from Chan & Naylor stumps up to answer some questions about land tax from Charlotte.
\n <\/p>\n

Transcript:<\/strong><\/h4>\n

Kevin:<\/b>\u00a0 Thank you for your questions. Keep them coming in the time; they\u2019re very, very welcome, of course. Just do it through the website. Go to RealEstateTalk.com.au. There\u2019s an \u201cAsk Our Experts\u201d question panel in there. Just put your question in.
\nWe got one from Charlotte in New South Wales, and I\u2019m going to defer in a moment to Ed Chan from Chan & Naylor to answer this one. Thank you for your question, Charlotte. Charlotte has a few questions on how tax is calculated. Don\u2019t we all, Charlotte? \u201cHow much do I have to pay? Do I have to pay land tax on my principal place of residence, and should I take this into account when I buy an investment property?\u201d
\nEd Chan joins me from Chan & Naylor.
\nGood morning, Ed. Nice to have you on the show, too.
\nEd:<\/b>\u00a0 Thanks, Kevin. Nice to be here.
\nKevin:<\/b>\u00a0 Let\u2019s answer Charlotte\u2019s questions. There are a number of questions in there. What do you want to tackle first?
\nEd:<\/b>\u00a0 Probably the question around land tax is a good one.
\nKevin:<\/b>\u00a0 It varies from state to state, doesn\u2019t it, Ed?
\nEd:<\/b>\u00a0 Yes, it does. You can go into the Office of State Revenue\u2019s website for each of the states, and you\u2019ll have all of the different rules and the rates and so forth. But generally speaking, the home that you live in is exempt, so you don\u2019t have to pay any land tax on that. However, if you rented that home out and put a tenant in it, then it becomes subject to land tax, so you have to be careful when you rent it out. Some people think that they\u2019re living in their home, they rent it out, and it\u2019s still exempt from land tax.
\nSome people also confuse the exemption from capital gains tax, which is a six-year exemption. If you moved out of your house and rented it out and then you moved back in, it\u2019s still exempt from capital gains tax but it\u2019s not exempt from land tax. As soon as you rent it out, it\u2019s then subject to land tax.
\nKevin:<\/b>\u00a0 How much time do you have in-between having it as your principal place of residence and then when you decide to put a tenant in there, how much time do you have to let them know that that\u2019s the case?
\nEd:<\/b>\u00a0 It\u2019s immediate. As soon as a tenant moves in, it\u2019s then subject to land tax immediately. It\u2019s all based on self-assessment, so you have to volunteer it. In other words, you have to fill in an application form. You can download that from the Office of State Revenue.
\nKevin:<\/b>\u00a0 I imagine if you don\u2019t do that, you\u2019re going to be in for a fine as well if they catch up with you.
\nEd:<\/b>\u00a0 Yes. Because it\u2019s self-assessment, people think that \u201cI\u2019ll just get away with it and not pay it,\u201d but you get caught when they do an audit. They do audits every now and then and they send questions that you have to answer.
\nBut also, when you try to sell your house, the purchaser generally wants a land tax clearance because unlike other taxes, land tax goes with the property. If I bought a house and there\u2019s land tax owing on it, then I take responsibility for that outstanding land tax liability.
\nKevin:<\/b>\u00a0 Wow. I imagine that\u2019s a search the solicitor would have to do prior to settlement. Wouldn\u2019t that be the case?
\nEd:<\/b>\u00a0 Yes, that\u2019s the general way to do it. You get your solicitor or your conveyancer and they generally should ask for a land tax clearance on the land as part of their job, their due diligence, if you like. It\u2019s important when you\u2019re doing this that they do that for you, otherwise you could potentially inherit a large land tax liability.
\nKevin:<\/b>\u00a0 I suppose as the portfolio grows, too, it\u2019s a good idea to search around to other states to spread that land tax liability around a bit.
\nEd:<\/b>\u00a0 Yes, that\u2019s the other issue. Land tax is calculated at a particular point in time, but then once you\u2019ve reached a threshold\u2026 And each state has a different threshold, and I won\u2019t cover all of the states, but just generally, for example, in New South Wales, it\u2019s around $482,000 in land value \u2013 that\u2019s the unimproved value of the land. So it doesn\u2019t include the property or the building that\u2019s on there. The Valuer General will generally provide an estimate of the unimproved value of the land. That\u2019s $485,000 in New South Wales.
\nIn Queensland, for example, it\u2019s $600,000 before you need to pay any land tax. In Victoria, it\u2019s around $250,000 before you need to pay land tax. Again, it\u2019s all in their website, so you can go in there and check it out for yourself.
\nKevin:<\/b>\u00a0 It doesn\u2019t adjust to each year, either. As values go up, land tax is not adjusted every year, so there\u2019s almost a bit of a creep-in there, isn\u2019t there?
\nEd:<\/b>\u00a0 Yes, there is, although it depends on the state. A lot of the states don\u2019t do it every year, so it could be several years before they bump the value up. When they bump the value up, they adjust the land tax.
\nOne important point I\u2019d better make is that when you buy a property, it\u2019s all based on self-assessment, so they won\u2019t automatically send you a bill for your land tax. It\u2019s on a volunteer basis. It\u2019s called self-assessment, not volunteer. Self-assessment is probably a better term.
\nYou go into their site and you fill out a form. It\u2019s an initial return. You send that initial return into the Office of State Revenue. They then assess the land, and if you\u2019re under the threshold, they\u2019ll send you a new assessment. If it\u2019s over, they\u2019ll calculate it and they\u2019ll then send you a bill.
\nHowever, once you\u2019ve done that, generally, in most estates, they\u2019ll send it to you every year, so you won\u2019t have to worry about it. It\u2019s the first one that you have to really worry about.
\nKevin:<\/b>\u00a0 Ed, great talking to you. Thank you very much. You\u2019ve answered all of those questions. Charlotte, the last part of your question, you said, \u201cShould you take it into account when you buy an investment property?\u201d Of course, you should; I think anyone would advise you of that.
\nEd Chan has been my guest from Chan & Naylor. Ed, thanks for your time.
\nEd:<\/b>\u00a0 Thanks, Kevin, and thanks for your question, Charlotte.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Ed Chan from Chan & Naylor stumps up to answer some questions about land tax from Charlotte.   Transcript: Kevin:\u00a0 Thank you for your questions. Keep them coming in the time; they\u2019re very, very welcome, of course. Just do it through the website. 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