Land; a complex investment

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:

1. The price of land in any major city or centre is very high.
2. Land is the only asset which is taxed at every level of government.
3. Transaction costs are very high.
4. Holding costs are very high.
5. Tax settings distort the entire market.
6. 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.