I am planning to buy a residential investment property
What the proposed property tax reform could mean for you.
Potential savings for investors.
Residential investors would have the choice to pay stamp duty and land tax or an annual property tax when they purchase an investment property.
Property tax would combine stamp duty and land tax into one. If you are a residential investor, you would pay a higher rate of property tax than owner-occupiers. The amount you would pay would be based on individual properties, not aggregate landholdings, unless your investment portfolio was large enough to make you liable for a portfolio surcharge.
Michelle and Rob are looking to buy their second residential investment property. They plan to sell after 10 years and use the profits to fund further investment properties. As residential investors, Michelle and Rob would have the choice to pay stamp duty and land tax, or the proposed property tax.
|2021 Investment property $800,000||Total State tax over 10 years (excludes income tax)|
|Stamp duty and land tax or||$31,335 + Starting at $5,920 p/a||[$31,335 + $70,420*] = $101,755|
|Property tax||Starting at $7,572 p/a||$90,072*|
Total savings over 10 years; $11,683
Michelle and Rob choose to pay the annual property tax and save $11,683 over 10 years under the proposed changes. They would also benefit from deducting property tax from their income tax.
* An (illustrative) estimated growth rate of 3.8% per year has been applied to the property tax and land tax payments.