It was a very quiet on the auction front last weekend due to the Queen’s Birthday holiday. The REIV reported just 242 auctions of which 179 sold, for a clearance rate of 74%, a little down on last weekend where the clearance rate was 83%, but still a very strong result.
Melbourne wide, the clearance rate in May was 81%, the highest for the month of May since 2009 according to REIV CEO Enzo Raimondo.
The most expensive house sold was 9 Bringa Avenue, Camberwell which sold for $3,316,000 the big mover in suburb growth, Glen Waverley saw the sale of 1 Blair Road for a whopping $2,450,000. The cheapest sale was in Craigieburn, little surprise there, with 5 Eve Court selling for just $330,000.
The most expensive unit sold, was again out in the Eastern suburbs when 1/12 Derby Street, Blackburn sold for a staggering $1,150,000, trumping Glen Waverley where 1/7 Fairhills Parade sold for $1,005,000. The cheapest unit sold was in Taylors Lakes for just $295,000.
Land Tax Scourge
The ‘scourge of land tax’ raised its head again this morning when a client emailed me to query a massive jump in his Land Tax bill. His last bill was just $575 for house and flat worth about $1.2m, but after buying a holiday house for a little over half that value he got ‘bill shock’ when he received a land tax bill of nearly $2000, Could that be correct?
I did a review and found that indeed it was correct.
Several factors conspired to ramp up his land tax assessment:
- They purchased their holiday home in a trust where land tax applies for land value above $25,000
- Trust owned land is tax at 0.37% commencing at the much lower threshold of $25,000
- The tax is applied only to the land component, my client’s initial investment properties included a house with low land value and a flat with ‘notional’ land value
- Both existing properties were purchased in their personal names, where there is a tax free threshold of $250,000, hence the relatively cheap previous tax bill
- The marginal tax rate for land value held in personal names is just 0.2% where the value is between $250,000 and < $600,000
- The land component of my client’s holiday house was greater than the combined value of both existing properties.
- Don’t buy in a Trust unless there is a good reason to do so, instead buy in your personal names where no tax applies until your land component reaches $250,000.
- Think twice about ever considering the purchase of a home inside a Trust as your tax free threshold drops by 90% and you may be liable for capital gains tax also, plus the tax office will take a very close look at any deductions you claim.
- When buying a property in personal names consider buying as ‘tenants-in-common’ rather than ‘jointly’ as ‘TIC’ allocates the percentage ownership whereas ‘jointly’ assumes both own the property effectively doubling your holding liability for land tax.
- Comparable houses can have substantially higher land component than flats.
- Always, always get competent advice BEFORE deciding which entity in which to purchase a property, the tax consequences can be huge.