VIC Land tax - Living next door to parents / adjoining property

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Penny Lost

Member
24 February 2019
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Hi All,

I live next-door to parents. >> How should we restructure our family properties to legally reduce land tax?

I'm writing on behalf of my parents. They received their land tax bill, which has doubled since last year! (30k >> 65k !!) They/we simply don't have that kind of money to pay it. I'm looking at what may have gone wrong or how we could legally restructure our situation to avoid this next year etc. We can't survive getting a bill for $100,000 in a couple of years!!!

My parents own 3 properties: A, B, C. Each on a separate title, owned jointly by them as husband & wife in Victoria.

A: ~$2M - my parents live in it. Husband and wife (both retired).

B: ~$2M - next door to A, on an adjoining block. I live in B with my husband & two young kids. We do not pay rent, but we all live as an extended family (for over 5 years). We have no separating fence between A & B and the buildings have a shared wall. You could argue that it is one large building, spanning the two, adjoining properties. We all come and go, look after kids, provide medical care to my parents, take out each other's bins, do dinners at either house and basically live as a large family in a large house (albeit, spanning two properties).

C: ~$3M - parent's commercial property, a short drive away. The rent from C is my parent's only source of income. It is barely enough to pay the new land tax. They have no super, no pension etc. They have a $400k loan still owing to the bank.

SRO land tax exemption applies only for property A. Property B, despite being on adjoining land, does not qualify for the exemption because it is considered to have a separate a dwelling on it.


HELP! Something seems innately unfair, given that they've paid tax all their lives, employed people, paid stamp duty etc. to buy properties and just want to live as a family during their twilight years, while keeping options open for property to be kept or sold when the time comes. If B was exempt, the tax bill would not be $65k but only ~ $25k.

I'm painfully aware that we get the 'luxury' of living with my parents. My husband and I both work and have a small ~$400k single-bed apartment as an investment property. This would not be possible without my parent's help.

I'd really appreciate feedback on how my parents and I should be structuring our situation to legally minimise taxes, stamp duties etc. My parents desperately want us to stay living with them as they both need more and more medical care. We can't afford to pay that type of land tax, given that the family as a whole is not renting out B to an external tenant. Do we sell apartment and buy B, structure C in a trust? Or in some type of self managed super? Does B qualify for land tax exemption given our situation?


Please help. ( I know it seems ludicrous, given the privileged situation I live in, but we can't sustain this level of land tax as a family!)

Penny.
 

Rod

Lawyer
LawConnect (LawTap) Verified
27 May 2014
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www.hutchinsonlegal.com.au
You and your parents need proper estate planning which may involve the establishment of family trusts.

Talk it over with your parents and post back here if that's something you want to go ahead with. This kind of advice is not normally cheap but the potential saving far outweighs this cost.

I can help if you wish to proceed with a well thought out and cost effective estate plan.