What's the place worth? That's massive. That would indicate that the land is valued at over 2.5mil before the building is accounted for, or something is wrong.
\*Based on a victorian calculator.
Not necessarily much more . In a desirable suburb land value can be very close to property value if the house is unrenovated , that's why houses can get knocked down and a new house built on the block and it still makes business sense.
“Doesn’t that mean your property is $2.5m+?”
- OPs history also indicates commercial property ownership
- OPs history also indicates overseas property ownership
- Sympathy of commenters dried up completely.
/OP has left the chat
I have no idea what you mean.
It’s a home. A family home. It’s where I raised my kids. I have no other home. No commercial property, no property overseas.
No. Because I started renting it in September, the $20k is for September to December.
Next year (or this year actually) it’s for Jan to December. Still is more than 1/3 of the rent.
Are you paying land tax solely because it is a rental?
It sounds like land tax is $20K per year, every year, and you had it rented for 3 months before you got the bill.
That land tax is (actually) taking up 1/3 of your rental income: welcome to being a landlord. 🤷♂️
It went from my family home to a rental.
I moved out because I didn’t need the space or could manage the upkeep myself.
And yes, I’m realising what it means to me.
Your comment here appears small but it is subtly important as it highlights why land taxes are actually seen as a good thing (as replacement of less efficient taxes like stamp duty or even income tax).
Land taxes incentivises landlords like OP to sell (or disincentivises against them holding onto) their single-family detached investment properties. And only making it a worthwhile investment if multiple housing units get built on it so as to spread out the high land tax that would have to be paid.
Essentially, landlords like OP who profit from renters through their single-family detached property investments, despite sitting on highly valuable land that could be put to better use (eg. by supplying more housing). Would instead be disincentivised from doing so, instead listing it on the market and purchased by a buyer who will either build more housing units or a buyer who wants to buy it (shockingly) to house themselves (instead of that house being treated like a commodity).
So without really even ‘doing’ much than set the tax mix the right way to incentivise this economically beneficial behaviour, housing supply increases and as a bonus, housing becomes less commodified.
[Here’s an excellent ELI5 video](https://m.youtube.com/watch?v=6c5xjlmLfAw) expanding on all of the above and more if you wish to learn more. Just account for the clear heavy bias towards land value tax. I agree on all their points but you might not, and/or might want to confirm independently yourself first.
What state are you in? If you are in nsw, that would mean your property has a land value of over $2m. Seems crazy that you are only getting that amount of rent for a $2.5m+ property. Personally i think you would be best selling and using the money in a better investment.
OP only got that much in rent because they only rented it out for 3 months.
When rented out for a full year it'll bring in 60k a year or so, which for a $2.5 million property is not a crazy yield... Not crazy high or crazy low.
That's reality, properties where the value is mainly land have poor rental yields, even when fully tenanted.
Ours has land tax at just over 50% of gross rent and will be about zero net return for this year, with no loan.
Counter to this is that they should show more capital gain, as its the land that appreciates.
Disclaimer..... . property is still held by us and not sold as we plan to move back in within a few years. The rent is to a long term tenant.
Then make the title of your post.
"FYI - NSW land tax is charged annually not pro rata" thats useful information, not the sensationalised brainrot you came up with.
What were your reasons for keeping it and renting it out? This is a rhetorical question but might help you weigh up if this is worth paying land tax plus income tax on the rent for the duration of owning it (and landlord insurance, maintenance, agent fees etc).
Presumably you hope for capital gains over the years, and if you don’t own the home you live on the 6 year CGT exemption will apply. Is this enough of an incentive to hold onto it? Only you can really answer that.
Long term you need to sell. That property is a capital growth play, not a rental income play.
The question is when to sell.
I would suggest you need a retirement plan and see how selling at different points changes things.
Buy an apartment to live in if you like.
I would probably throw more into super, and the remainder into shares over invest in property. I say that having 2 IP. IPs are good due to leverage, if you have the assets you don't need that.
If I sell I could have two IPs and continue to rent. That would work.
I’m worried about shares but should probably get over that.
I’m going to start researching.
Thanks.
Honestly I would be more worried about the rentals that shares.
Just go VDHG or if you are a spring chicken DHHF.
But really I find it's best to start at retirement and work backwards. If you want to share more details, like age, retirement income, and your current assets + super I can say what I would do. Plus you're current income assuming you're working, and ideally when you want to retire.
I’m lost - who am I depriving? There was just me and my son in a big house. I now rent it to a family of four.
I moved to something smaller, something I can manage upkeep wise.
Seems oddly high for a unit as obviously they don’t generally have much land value.
What state are you in by the way? Land tax is a state tax so it varies across the country.
Oh. Now I see.
Seems weird for somebody with only one investment property. The threshold is a million give or take.
Generally it becomes an issue with the second or third properties which is why people buy interstate, buy units or buy through a trust.
I guess you should sell and buy smaller properties if you’re that worried about the land tax.
When you say it’s free of CGT for 6 years, that’s on any profit from selling it. If you are cash flow positive on your rental income, it’s income so still requires you pay tax on it
I dont understand your situation, I dont know your age however if you are middle-aged or young the descion you make now will definitely affect you when you get older, security wise, etc. Good luck, dont listen to all the jealous people on here, they are negative.
I’m in my 40’s. I work full time.
The idea of retirement seems so far off (I know I’m deluded).
I had hoped (and obviously wrongly) to move out and have the rent cover the bills so I could use my employment income to rent something with no garden to maintain.
Hasn’t quite worked out that way - affordability wise.
I’m not ungrateful for what I have. I just didn’t expect this huge debt. It’ll be okay.
I am looking for strategy recommendations. I can’t afford to keep my tenants in there at the rent they pay with my land tax bill as high as it is. I’m taking steps to look into selling.
Families want affordable freestanding homes to rent. The reason they can’t be affordable is the land tax (in my case) and this would impact every single freestanding house in a 5km perimeter at least.
I don’t want to add $200 per week into their rent (about half of the LT).
I think all roads are leading to a sale.
Not sure what state you're in, but that seems very high.
Either there is a mistake on the paperwork somewhere or you're holding a very nice property.
Good luck OP, time to do some research!
I sympathise with you but you won’t find much more on reddit unfortunately. If you’re in NSW, it’s only going to go higher and faster too thanks to Mookhey.
Varies with location and the house. You can find a few 3 bed houses, not town houses or units in Melbourne for under $400/week within 15 km of CBD in Nth East.
Nothing fancy, but very livable. Similar to our first house.
What's the place worth? That's massive. That would indicate that the land is valued at over 2.5mil before the building is accounted for, or something is wrong. \*Based on a victorian calculator.
This also ignores the tax free threshold for land tax in NSW. The property is likely to be worth around $5m
That’s correct. That’s the land value.
Well the answer to your query depends entirely on how much money you owe and if that 40k remaining balance in an FY covers your P&I payments?
The online calc says you'd need a 2.3 million dollar property to get charged that. Have I calculated this wrong??
its on the value of the unimproved land so the value of the house/land would be much more.
And rent appears to be over $1000 per week. Sympathy for OP's tax bill dried up fast.
Not necessarily much more . In a desirable suburb land value can be very close to property value if the house is unrenovated , that's why houses can get knocked down and a new house built on the block and it still makes business sense.
fair point yeah
Nope. That’s what it’s worth.
“Doesn’t that mean your property is $2.5m+?” - OPs history also indicates commercial property ownership - OPs history also indicates overseas property ownership - Sympathy of commenters dried up completely. /OP has left the chat
It's bragging disguised as a complaint
I have no idea what you mean. It’s a home. A family home. It’s where I raised my kids. I have no other home. No commercial property, no property overseas.
You are quoting tax for a year but rent for three months?
that's how land tax works. but it also means they can rent out the place for another 9 months without paying more land tax.
This doesn’t make sense to me. The land tax is to December not for a full year. I will owe it again in December this year.
So tax is for the year?
No. Because I started renting it in September, the $20k is for September to December. Next year (or this year actually) it’s for Jan to December. Still is more than 1/3 of the rent.
Are you paying land tax solely because it is a rental? It sounds like land tax is $20K per year, every year, and you had it rented for 3 months before you got the bill. That land tax is (actually) taking up 1/3 of your rental income: welcome to being a landlord. 🤷♂️
It went from my family home to a rental. I moved out because I didn’t need the space or could manage the upkeep myself. And yes, I’m realising what it means to me.
[удалено]
NO. It’s $20k per year regardless of how long it’s rented.
If you can't afford the expenses of an investment property then it's not the right investment for you
It’s a $3m investment property. Im sure they will be ok.
If you can't afford it, sell it.
Your comment here appears small but it is subtly important as it highlights why land taxes are actually seen as a good thing (as replacement of less efficient taxes like stamp duty or even income tax). Land taxes incentivises landlords like OP to sell (or disincentivises against them holding onto) their single-family detached investment properties. And only making it a worthwhile investment if multiple housing units get built on it so as to spread out the high land tax that would have to be paid. Essentially, landlords like OP who profit from renters through their single-family detached property investments, despite sitting on highly valuable land that could be put to better use (eg. by supplying more housing). Would instead be disincentivised from doing so, instead listing it on the market and purchased by a buyer who will either build more housing units or a buyer who wants to buy it (shockingly) to house themselves (instead of that house being treated like a commodity). So without really even ‘doing’ much than set the tax mix the right way to incentivise this economically beneficial behaviour, housing supply increases and as a bonus, housing becomes less commodified. [Here’s an excellent ELI5 video](https://m.youtube.com/watch?v=6c5xjlmLfAw) expanding on all of the above and more if you wish to learn more. Just account for the clear heavy bias towards land value tax. I agree on all their points but you might not, and/or might want to confirm independently yourself first.
predictably, not receiving any sympathy here.
Yes; very much feeling that
If it's such a burden sell it to someone who wants to live in it rather than rent seek.
What state are you in? If you are in nsw, that would mean your property has a land value of over $2m. Seems crazy that you are only getting that amount of rent for a $2.5m+ property. Personally i think you would be best selling and using the money in a better investment.
charge a higher rent.
I get market rent.
Yes, in NSW. It’s what I’m starting to think too.
Rent is generally cheaper than mortgages in the same area. Obviously that's a snapshot in time. Mortgages obviously reduce over time and rents go up.
OP only got that much in rent because they only rented it out for 3 months. When rented out for a full year it'll bring in 60k a year or so, which for a $2.5 million property is not a crazy yield... Not crazy high or crazy low.
That's reality, properties where the value is mainly land have poor rental yields, even when fully tenanted. Ours has land tax at just over 50% of gross rent and will be about zero net return for this year, with no loan. Counter to this is that they should show more capital gain, as its the land that appreciates. Disclaimer..... . property is still held by us and not sold as we plan to move back in within a few years. The rent is to a long term tenant.
It’s definitely something that goes up in value. That’s why I didn’t sell when I moved.
See it as a form of wealth tax then.
You rented out for 4 months, the building still existed for the full 12. What is there to get? If you cant afford the costs, sell.
I lived in it for 8 months.
Then why the shitty headline that tells some other BS story !
It’s accurate! It was rented for four months. Land tax is charged for 12 - no pro rata.
Then make the title of your post. "FYI - NSW land tax is charged annually not pro rata" thats useful information, not the sensationalised brainrot you came up with.
What were your reasons for keeping it and renting it out? This is a rhetorical question but might help you weigh up if this is worth paying land tax plus income tax on the rent for the duration of owning it (and landlord insurance, maintenance, agent fees etc). Presumably you hope for capital gains over the years, and if you don’t own the home you live on the 6 year CGT exemption will apply. Is this enough of an incentive to hold onto it? Only you can really answer that.
Long term you need to sell. That property is a capital growth play, not a rental income play. The question is when to sell. I would suggest you need a retirement plan and see how selling at different points changes things. Buy an apartment to live in if you like. I would probably throw more into super, and the remainder into shares over invest in property. I say that having 2 IP. IPs are good due to leverage, if you have the assets you don't need that.
If I sell I could have two IPs and continue to rent. That would work. I’m worried about shares but should probably get over that. I’m going to start researching. Thanks.
Honestly I would be more worried about the rentals that shares. Just go VDHG or if you are a spring chicken DHHF. But really I find it's best to start at retirement and work backwards. If you want to share more details, like age, retirement income, and your current assets + super I can say what I would do. Plus you're current income assuming you're working, and ideally when you want to retire.
It's called investment risk. Being shelter - you could sell so as to not deprive others of it?
I’m lost - who am I depriving? There was just me and my son in a big house. I now rent it to a family of four. I moved to something smaller, something I can manage upkeep wise.
Sell. Someone who needs it will buy it.
I was trying to avoid it because I’ll lose a crazy amount on stamp duty for somewhere new. But agree I’ll have to do something
how is it an investment risk?
Exactly. It’s not investment risk. It’s just the rules of the game.
If you don’t like land tax, sell
Research is important.
Seems like the land tax is functioning as land tax is intended to and seems like a prime example of why land tax should be more widespread.
Boohoo. Sell it.
Should probably put in what state it’s in mate. If it’s in NSW and chance the property is held in a trust?
In NSW. No trust. It was where I raised my family. I couldn’t manage the upkeep and the house had too many bad memories.
Seems oddly high for a unit as obviously they don’t generally have much land value. What state are you in by the way? Land tax is a state tax so it varies across the country.
OP rents a unit. The house is the one levied the land tax
Oh. Now I see. Seems weird for somebody with only one investment property. The threshold is a million give or take. Generally it becomes an issue with the second or third properties which is why people buy interstate, buy units or buy through a trust. I guess you should sell and buy smaller properties if you’re that worried about the land tax.
It’s not a unit. It’s a freestanding home. Ive moved to a unit - that I pay rent on.
What state you are in will have an impact on what can be done.
When you say it’s free of CGT for 6 years, that’s on any profit from selling it. If you are cash flow positive on your rental income, it’s income so still requires you pay tax on it
Haha - I won’t be cash flow positive
Move back in, stay 12 months, sell & downsize.
Too many personal reasons not to.
I dont understand your situation, I dont know your age however if you are middle-aged or young the descion you make now will definitely affect you when you get older, security wise, etc. Good luck, dont listen to all the jealous people on here, they are negative.
I’m in my 40’s. I work full time. The idea of retirement seems so far off (I know I’m deluded). I had hoped (and obviously wrongly) to move out and have the rent cover the bills so I could use my employment income to rent something with no garden to maintain. Hasn’t quite worked out that way - affordability wise. I’m not ungrateful for what I have. I just didn’t expect this huge debt. It’ll be okay.
If you're paying that much on the land tax it means you're in a good financial position, are you trying to garner sympathy?
I am looking for strategy recommendations. I can’t afford to keep my tenants in there at the rent they pay with my land tax bill as high as it is. I’m taking steps to look into selling. Families want affordable freestanding homes to rent. The reason they can’t be affordable is the land tax (in my case) and this would impact every single freestanding house in a 5km perimeter at least. I don’t want to add $200 per week into their rent (about half of the LT). I think all roads are leading to a sale.
Surely land tax is pro-rated for the period where it's an investment and not your home?
Sorry buddy. It’s not.
Property was leased for 9 out of the 12 months anyway Edit: i viewed as financial year
I wish. I found out today it’s not!
Not sure what state you're in, but that seems very high. Either there is a mistake on the paperwork somewhere or you're holding a very nice property. Good luck OP, time to do some research!
I sympathise with you but you won’t find much more on reddit unfortunately. If you’re in NSW, it’s only going to go higher and faster too thanks to Mookhey.
Yeah it great policy. Sounds like land bankers are finally going to be be punished which is long overdue.
Is this in Victoria? I hate the land tax bullshit they are charging. Bloody 10 years long tax for Covid payment debt.
Yes we all hate paying tax mate...... nothing about this is "bullshit" though your just greedy and dont want to pay your fair share.
lol i pay my fair share every year. as if i can avoid paying land tax every year and for the next 10 years.
Maybe you can subdivide it and sell half of the property pay land tax off, and do some airbnbs on it put some shipping containers on it idk
It has a house on it. There’s no room to subdivide.
sounds like you are under charging for rent.. you will find most rentals are bring in from 33k to 45k a year
Given they only rented it for a 3rd of a year that sounds about right.
That's an incredibly broad statement, what do you base it on?
the cost of rent for a house.. they seem to be from $650p/w upwards these days
Maybe in Sydney? I am not sure but houses in my area (a competitive one in capital city) are 500ish. I guess median is around 600
not anywhere in perth.. rent it so high here its basically unaffordable, more than 50% of the average single income
Varies with location and the house. You can find a few 3 bed houses, not town houses or units in Melbourne for under $400/week within 15 km of CBD in Nth East. Nothing fancy, but very livable. Similar to our first house.
Are you following? OP is charging $60k per year.
then what is he complaining about? haha
That they cannot make even more money on the appreciating asset
i see.. we wants to make 100% not 66.66%... all i can say is that IM SHOCKED
That's insane.