EXAMPLE 1 - BEFORE YOU PURCHASE A PROPERTY
You have a high income and your spouse has a low income and you are looking to purchase a new investment property. You want to maximise your negative gearing benefits by having the property in your own name but you already hold another property in your name. If you hold two South Australian properties in your own name they are added together and attract a higher rate of land tax. We can calculate for you the potential negative gearing benefits vs the potential land tax cost so you get the best result. For example the negative gearing benefit of holding the property in your own name might be $4,000 but your extra land tax payable may be $6,000 meaning you could be $2,000 worse off per year having the property in your own name vs having the property in joint names.
EXAMPLE 2 - TRUSTS AFFECTED BY UPCOMING LAND TAX CHANGE (POST 1/7/16)
You hold two properties in two separate trusts. The two trusts have the same trustee and beneficial ownership. Due to changes in interpretation of land tax rules those two properties are going to be added together for the calculation of land tax resulting in an extra $10,000 land tax per year. It may be possible to change the trustees of one of the trusts resulting in some conveyancing costs on updating the title but this would likely be offset by the ongoing land tax savings. You may also benefit from greater asset protection.
EXAMPLE 3 - INCORRECT OWNERSHIP ASSUMED BY REVENUE SA
You hold properties in your own name and in a trust. These properties with different ownerships are being incorrectly grouped together by Revenue SA for land tax purposes. This can occur if Revenue SA have not been notified that one of the properties was being held in a trust. By lodging a declaration the properties would be recognised as being held in different ownerships and taxed at lower land tax rates potentially saving thousands.
Land Tax is a commonly overlooked tax and needs to be considered along with other property costs and benefits to obtain the best result. Individual circumstances vary and advice should be sought before taking any action. Contact us today to see how we can help you.