Some people work hard their whole lives just to afford one house. They accumulate wealth slowly and eventually have the cash saved up to make the down payment and pay off the mortgage to own a home. For other individuals, just one piece of property isn’t enough – they want more.
There are many benefits to owning additional property. You can use it as an investment. You can have a second home as a holiday destination. You can rent a place out and use it to make additional income. All of the above can be worthwhile – but owning extra property comes with a significant drawback. Have you thought about land tax?
Who needs to pay tax in Australia?
When you buy another home, mortgage repayments are far from your only financial burden. According to the NSW Office of State Revenue (OSR), a variety of property stakeholders might be required to pay land tax. This includes anyone who’s a sole owner, joint owner or proprietor of a company that owns additional property beyond their home.
You might own land that’s vacant, or reserved for future development purposes. Alternatively, you might have a second home that you’re using for holidays, renting or simply holding onto as an investment. The OSR has made it perfectly clear that any of the above can be subjected to land tax obligations.
Minimising your financial burden
While land tax can potentially hurt you financially, there are some ways to be creative with your money and avoid being crippled by tax payments, according to RealEstate.com.au. One strategy is to pay attention to depreciation schedules – if your property is losing value as it ages, you can measure those decreases and deduct them from what you owe.
Additionally, if you decide to sell some of your property, you can speak to your accountant to ascertain the best the timing. For example, perhaps settling after July 1, thus putting off any capital gains taxes for a year.
A good broker can help navigate the landscape
You might not enter the property investment process as an expert, but you can gain a bit of the necessary expertise by talking with someone like us, who have been through it before and know what to expect.