Land Tax – Are you a groupie?
Are you a Land Tax Groupie??
If you thought the increase in the marginal rates of income tax were bad (approximately 3 times), well the Office of State Revenue really show the ATO how it can be done.
With land tax rates ranging from 0.1% (for unimproved values between $300K- $1M) to 1.37% (from $2.2M-$5.5M) to 2.43% for $11M plus, the top rate is some 24 times the lowest rate.
As this is applied to the aggregated value of all taxable property held in common names, the disaggregation of land is best dealt with as and when you buy additional property rather than by post purchase restructuring. This is in part because of the anti-avoidance provisions and the restructuring may result in stamp duty and income tax.
For example the Land Tax on 3 separate properties where the unimproved value of the land is $1M each and there is no aggregation is approximately $2,100 in total for the 3 properties. However, if the 3 properties are aggregated then the land tax is approximately $18,000.
Properties held by different trusts are usually not aggregated even if the same trustee is holding the properties for different trusts and also in its own right. Unfortunately as there is no reference to the trust on the title, the Office of State Revenue often aggregate properties incorrectly. As such it is important that your land tax assessments are checked as and when they issue.
A recent review for one client resulted in a $50,000 refund for past taxes but more importantly the holdings were correctly separated so the correct and reduced land tax can be charged on a go forward basis.