Capital Gains Tax

Capital Gains Tax

Introduction

In Australia property tax is known as land rates and each city has different land rates that need to be paid by the owners of the property in terms of frequency payments. Different cities have land councils that determine the worth or the value of the land. Property can be of any kind like a building, piece of land, house and etc. The property can be used for two purposes; one for the residential purpose and second for conducting or using it for business purpose. Over the years it has been observed increasing trends in tax rates and variation has occurred in the tax rates on the basis of the locality. The following analysis will provide guidance to Mr. Smith on the tax consequences as result of buying a piece of land which he will use for living and conducting business activities.

Discussion

According Chan & Naylor (2009) in Australia land tax is a tax levied by the State and this is the reason that every state in Australia has its own tax rules and regulations. Even if a person owns many properties in different states, even then he will have to pay and fulfill all the rules and individual tax obligations accordingly. The following are the tax consequences which Mr. Smith needs to take into consideration for his decision of buying the property and using it for living and business purpose.

First thing that will be applied on the land bought by Mr. Smith is that he has bought the property therefore he will have to pay tax under the State Revenue bill. The buyer of the property has to pay a stamp duty tax which is charged as an ad valorem tax for the properties that have more value than $ 500,000. Mr. Smith's property has a worth of $ 600,000 so this tax will be played by the owner at the time of transferring the land to Mr. Smith. Another thing which Mr. Smith will have to ensure is that if he is an Australian than he will have to pay water tax as well. The 2-hectraes part of the property that will be used for accommodation purpose will be exempted from the payment of tax and the owner will not have to pay any tax on residential property.

In Australian Capital Territory tax is analyzed on quarterly basis that is in July, October, January and ...