Having been in the public practice of income tax compliance for close to 20 years, I am not so sure about this pithy chunk of logic. It belies deep complexity.
From my perspective, land is a tricky thing to invest in. This is particularly true in Australia because:
- The price of land in any major city or centre is very high.
- Land is the only asset which is taxed at every level of government.
- Transaction costs are very high.
- Holding costs are very high.
- Tax settings distort the entire market.
- Policy settings which favour land stifle innovation.
This is a highly summarised list of the fraught nature of property investment in Australia. Yet pretty much everyone has to play this game to some extent.
Despite the complexities, there are a few simple truths that apply to land investment in Australia. What can be said for sure is that a strong understanding of the local, State & Federal tax laws that apply to any particular interest in land is a massive benefit in building a tax efficient property portfolio, even if that portfolio consists of a single property. It is also true that in Australia, the single most important investment most families will ever make is in their main residence. The house you live in is a politically protected asset class and it is by far the most important non-productive asset an Australian resident taxpayer or citizen can hold.
To plan for a smart land purchase, whether it be your first or subsequent, it is important to seek the advice of a tax accountant who is also an experienced land investor.
Call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au to discuss your plans.
