LAND TAX - WHY PROPERTY INVESTORS SHOULD TAKE NOTE
Land tax is an important issue for property investors.
In this video, we discuss why investors should take note of land tax rates and how they can benefit from paying attention to this aspect of their investment portfolio.
I’m going to outline some major changes happening in New South Wales and Queensland, then link it back with why I think all property investors need to understand government attitude towards tax going forward, which will make them more prepared for the future implications on their investments.
NSW Abolishes Stamp Duty
First, I’m going to talk about New South Wales and their abolishment of stamp duty.
For everyone’s understanding, “Stamp Duty” is the tax the state government charges for certain documents and transactions which you must pay upfront when purchasing a property. It is one of the major forms of revenue for state governments.
Unfortunately, because property values have accelerated so much in previous years, stamp duties now become a very large payment for someone wanting to buy a house.
This actually has become so large that now it provides a hurdle to people getting in the property market, which is why they want to get rid of it.
So the NSW government has recently announced that first-time buyers purchasing homes for less than $1.5 million will be able to opt to pay an annual property tax instead of stamp duty. The property tax will only be charged to first-home buyers who choose it, and it won’t apply to subsequent purchasers.
This initiative will help increase the rate of home ownership in NSW by lowering up-front fees for home purchases.
Queensland to Follow Stamp Duty Reform
Now, there are similar changes in Queensland. Let me read a quote from a recent article.
“During the 2021-2022 Budget Update, the Queensland government announced changes that will see property owners pay land tax at a rate that considers all their landholdings across the country. This means that interstate properties will be aggregated to the Queensland landholding in determining the applicable land tax rate.”
Let me explain that this is going to really drive some property investors crazy.
So land tax already exists in different formats throughout the country. The general rule is that the state government only taxes you based on the properties that you own within that state.
The big deal with Queensland’s recent announcement is that property owners will pay a land tax that considers all of their landholdings across the country!
That means that if you have one property in Queensland, but you have a $2 Million worth of property in Victoria, you’re going to get charged by Queensland for your $2 Million worth in Victoria. Unfortunately, that means you’re still going to get charged in Victoria.
This is the main reason people are worried about this. It’s going to create these large costs for property investors, and it could be detrimental to property investors within particular states.
What Investors Need to be Wary of
So as a mortgage broker and as a finance professional based in Victoria, I’m going to share what I think investors need to be wary of.
Firstly, we are in an economic environment where it is favourable to go into debt to cover state and federal spending deficits.
What does that mean? It means that our states and governments are spending more than they earn and how they accumulate money is through taxing us.
I want to say that throughout the history of economics, there’s never been a country or a state that can continuously spend more than what they have.
There will be a breaking point where they will not be able to keep on doing this anymore.
It’s just like individuals spending more than what they’re earning so they need to top up their credit cards. Eventually, you’ll get too much debt, and this is what property investors need to be aware of.
That will be the time where the poor get poorer, and so reduces the government’s ability to tax them.
Remember that none of what I say is financial advice, but I think what you need to do is consider how and where your investments are allocated.
Summary
I think property investors will actually be an easy target for governments to tax because most of it is passive investing.
So just because we’ve had favourable times in property, it doesn’t mean they’re going to last forever. We now have rising interest rates and inflation to deal with.
So, in my opinion, this decade is going to be throwing out a lot of surprises.
Best of luck in your investing journey! If you need help with managing your debt or you need a good mortgage broker on your side, feel free to arrange a call to the team here at Will Bell Mortgage Broker. Cheers!
Will Bell
Will Bell has 15 years’ experience in the finance industry, the last 11 years he has owned and operated Will Bell Mortgage Broker. He specializes in residential home loans and over the years has carved out a trusted brand. This is proven by the reviews his customers have made regarding the service and the experience he has provided.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
