If you own investment property, watch out for land tax.
Land Tax is a wealth tax payable annually by owners of investment property.
Land Tax is payable if the land value of property is above the tax threshold. Each State has a different threshold - from $50,000 in Victoria, to $300,000 in Western Australia, to $500,000 in Queensland and to $1,075,000 in New South Wales. Land tax is payable on land value above the threshold at rates up to 3% of value.
Land Tax is payable on all land owned in a State.
Land Tax is payable only on land value - not on the value of the building / improvements built upon the land.
These are two ways to avoid land tax traps:
- Diversify your property portfolio across more than one State. This takes advantage of the land tax thresholds which apply in other States.
- Increase rentals by investing in multiple tenancy properties instead of single tenancy properties, or by adding another rental space to a property. Increasing the rental income stream takes advantage of the fact that land tax is payable on land value, not the improvements.
Video link How to avoid land tax traps