Monday, 8 December 2014

Trap #5: Ignoring Land Tax

A superannuation fund is a treated like a trust for land tax purposes. This means that if the taxable value of the land under which your property sits exceeds the land tax threshold, then you will pay land tax. This is a trap especially if the property is a house not a unit. The current threshold is $350,000 for the taxable value of the land only. Above this and you will pay land tax.

Don’t fall into this trap and get your solicitor to do a land tax search on the property. Ask the real estate agent and get it in writing from them confirming this. Ask the agent to get copies of the prior year’s rates notices to see what the land value is. Whilst land value for rates purposes is different to taxable value for land tax purposes, it will give you an idea if land tax is going to be a problem for you. You don’t want to be unexpectedly forking-out more money from your retirement savings simply because you didn’t check if land tax was applicable and payable.

A client of mine was specifically told by an agent he had engaged that land tax would not apply to the house he had just purchased in his SMSF. The following year he received a Land Tax Assessment for $8,000!

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