Blog
How one day can make such a difference
May 8, 2020
If you happen to be selling an investment property, make sure you get appropriate financial advice. This advice may not be from a company who just lodges your tax each year, but someone who is qualified to advise you, like an accountant or a financial adviser. In my (almost) 12 years in this industry, I’ve seen so many times when all for the sake of one day, a seller has done the wrong thing by scheduling exchange or settlement on the wrong day.
This article is not giving you financial advice – it’s telling you all about what I’ve seen occur during my time selling real estate. I am screaming from the rafters forever telling sellers (and my clients who are buying) to always get financial advice.
To quote from ACT Government’s land tax advice at https://www.revenue.act.gov.au/land-tax :
“Land tax applies to residential properties which are not the owner’s principal place of residence. It is assessed quarterly on 1 July, 1 October, 1 January and 1 April each year. “
If income is received on those individual days within each quarter, unless you are exempt, land tax for the entire quarter is payable. I’ve seen a property manager starting a lease on 28th September, having no idea that 2nd October might strategically make more sense for the landlord. When I queried why the real estate agency thought it prudent to not give the landlord that advice, the reply was that they’re not financial advisers and it wasn’t their job to do that. However, it was that agency’s job to lodge the form to ACT Government that the income started on 28th September.
I’ve also seen settlement occur on an investment property a week after a critical date of land tax. There are times when settlement has to occur on a particular date and can’t be rushed or extended just to factor in a land tax liability. I’ve had an investor tell me the land tax amount would reduce his capital gains tax liability and he saw it as a positive. Just be aware and be informed.
In terms of buying an investment property, I held an Auction a few years ago at lunchtime instead of 5pm on 30th June. The investor buyer went to the counter at ACT Government that afternoon to pay the stamp duty so the receipt showed 30 June. They lodged their tax return the following week. Imagine buying an investment property on 2nd July and having to wait a year to get the benefit.
Speak to your accountant about buying in the ACT where the stamp duty is 100% tax deductible, as it is crown land, not freehold like the states. I’ve had interstate Accountants in Brisbane and Perth ring me because they weren’t aware of that. In the last decade, I’ve been the only agent in our region to be returned on the Defence Housing Australia Panel Of Agents three separate times. Every year from February to June, it is certainly the best time to buy an ACT investment, as it is very feasible your rental income before 30th June is no-where near your stamp duty costs.
And as I said earlier, get financial advice! Every person has different debt and equity ratios, and every person has to get individual advice.