Paul Glossop: Welcome again guys to Pure Property Investment one-on-one. Today I’m here with Munzurul Khan. Munzurul is the principle of Keshab Chartered Accountants. Munzurul has joined us today to really speak about certain aspects of property investing which I think, again similar to structures, is something that people don’t necessarily consider until it’s too late. And what we wanted to cover today is land tax in Australia. Being a very unique country in the sense that we’re very large, we’re governed by multiple states, and every state has its own land tax threshold, land tax rules, and different limits that people can potentially exceed or come underneath, and how that’s going to reflect on different land tax claims.
You’re probably the best person I know to really give a bit more guidance and guide us on how to really understand land tax, and plan to purchase properties in different structures, and also understanding land tax thresholds, and how they can work both in your benefit and to your detriment. So mate if you don’t mind elaborating a little bit.
Munzurul Khan: Absolutely Paul. The dreaded land tax, right? The dreaded land tax that we hear from all the investors side of it. So you touched it, you touched it quite a bit. The issue with the land taxes that because it is a state tax, each state is different. So New South Wales is different from Queensland, and different from Victoria, are different from ACT and different from different states, as such, and territories. Also it is different based on whether you buy it on individual line, based on whether you buy it on a trust, based on whether you buy it on a corporate entity.
So just a couple of examples. As an example, in New South Wales you’ve got a land tax threshold up to about five hundred and forty odd thousand on individual name. On trust you don’t have any threshold. Queensland as an example, you got a threshold all the way up until six hundred thousand if we buy it on individual. But if we buy it on trust you do have a threshold, but the threshold is only about three hundred fifty odd thousand. In Victoria as an example if you purchase you don’t have a threshold, you’ve got a very small threshold about twenty-five grand or so. Then you pay a surcharge if you buy it on a trust. On individual name you do receive a threshold, ACT no land tax, it’s leasing as such.
So each state is different, each state is different, each territory is different. But there are some golden rules I suppose in terms of what do we do with the land tax. I suppose one of the golden rules I always say is that when you invest in a property you look into the longer-term. You see what is your longer-term objective. So based on your longer-term objective, based on your portfolio, you consider. So one golden rule is perhaps not to buy on a combined name. So New South Wales as an example, if you buy it on a combined name rather than receiving two threshold, you are only receive one threshold as such. So a few you golden rules as such. But what I say all along, is that before you purchase it, run that through with your accountant. That, “Munzurul, this is my accountant, this is what my circumstances are, these are all the properties that I have, this is what my exit plan, with this investment property in medium to longer period of time is. Where is it best suited, is it on individual, is it on trust, is it on a different structure?”
Paul Glossop: Bang on. But again there’s a lot of complexity when it comes down to buying property and land tax structures in this country. And I think you’ve probably outlined really clearly the fact that I don’t expect people to sort of take that and say, “I’m now an expert on land tax.” But what I do expect people to probably understand from that is if you are going to be buying a property without an actual plan, and how that’s going to affect potential land tax thresholds, have that discussion with your accountant who’s property focused and understands all those before you sign the dotted line. And I think even the quick one that you outlined there, buying properties in joint names in New South Wales for example, you’re all of a sudden going 50/50 and a land tax threshold. You’ve all of a sudden lost half your opportunity and that’s something that a lot of people could avoid if they had that discussion well beforehand.
So guys again, if you do want to get in touch with Munzurul for any reason regarding any tax or accounting questions, please feel free to contact him at the bottom of the screen numbers there. You can also talk to us, our details at the bottom of the screen. We can set up a discussion to set up your strategy and your objectives down the track as well. Thanks for joining us and we’ll chat soon. Cheers!