I was shocked at the last lot of taxes so decided to graph some numbers.
Traditionally property was a safe and sound investment that always goes up in value. I am no longer convinced that it is as safe as it once was.
Those that own rental properties or owner occupied properties know about the following local and state taxes.
- Land tax – a state government tax.
- Rates – paid to the local council
- Water rates – was local and now state government tax.
As I have owned properties since 1993, I decided to graph the latest changes from 2005 to today’s date, just to see how much of an increase has occurred. Even though the rental price increases and matches inflation and market rates, the percentage of taxes is constantly increasing.
As you will clearly see, the percentage of taxes that any property owner pays to the local and state government has increased substantially over the last seven years from 16% of the rental income to now being 24%.
The federal government is wondering why businesses pay less company tax at the end of the year. Well it becomes obvious that the states are taking a large percentage. At this rate, the taxes will be equal to ¼ of the rental revenue (even indexed for inflation) by the 2012-2013 financial years.
That is 1 dollar in 4 is given to the local and state government in the form of tax. When you add the interest rate to the value of the property, it quickly can become a loss, unless careful.
The rates, water rates and state land tax are all part of owning properties. The properties have not changed but the amount paid to the government has increased beyond inflation.
No wonder the property market is declining in capital value, and the rents are increasing beyond inflation.
I thought this was very interesting.