Real Estate Tax

The major real estate tax you need to be aware of is land tax. Land tax is levied and collected by State Governments. Often there are different levels of tax free thresholds in each state based on the land value of the properties you own.

How To Minimise Land Tax

Land Tax can be minimised through diversifying your investments. Owning investment properties in multiple states and in various entities can ensure that the tax free threshold is fully utilised.

Example 1 – Owning Properties in Multiple States

Richard owns a properties in Victoria, New South Wales and Queensland. Each of these states have their own land tax rules and separately collect land tax. Each state has a tax free threshold that Richard can utilise to minimise his land tax.

If Richard owned all three properties in the one state, his land tax would be higher as he only has one tax free threshold to utilise and his overall property holding is higher.

Example 2 – Owning Properties in Various Entities

Richard owns a property in the Richard Family Trust and owns another property in the Richards Other Family Trust. This means that both entities are able to claim the tax free threshold and that the capital of both properties is split between two different entities thus lowering the land tax.

As land tax varies from state to state it is really important to get good tax advice from a property oriented accountant. As different trusts have different legal and tax implications you need to seek professional legal advice from a property oriented lawyer.