What is Land Tax?
Land tax is a state tax, calculated on the capital unimproved value of the property as at the 31 December in each year. The tax rate that applies depends on what type of owner you are, the total taxable value of the property and if any exemptions apply.
Land tax may be payable on rental and investment properties, commercial property, holiday homes and vacant land, subject to the threshold (see below).
Land Tax Threshold
There are thresholds that need to be reached before a landowner will be charged land tax. The threshold at the moment in Victoria is $250,00.00 each calendar year. In other words, a land owner will pay land tax when the total value of all their Victorian property as at 31 December in each year, minus exempt land, is equal to or exceeds the threshold.
If a land owner owns land as trustee of a trust, the threshold amount is $25,000.00. Further, a surcharge rate on the general land tax applies for the aggregate land holdings of the trust from $25,000 through to less than $3 million. The surcharge ceases to apply for taxable land holdings valued at $3 million or more.
Exemptions from Land Tax
Most Victorian land owners are not liable from land tax because their property is their principal place of residence. A land owner who uses the land for primary production or rooming houses and charitable institutions are also exempt from land tax.
If a land owner decides to rent out their principal place of residence or change their address, the principal place of residence exemption ends and the property may be subject to land tax if the property is valued at or above the threshold amount.
Payment of Land Tax
The State Revenue Office (“SRO”) is tasked with issuing assessment notice and collecting land tax. Land tax assessment notices are issued between late January and late May each year. Land tax can either be paid in a lump sum or quarterly.
From 1 January 2017, a 1.5% absentee owner surcharge on land tax applies to land owned by an absentee owner.
Vacant Residential Property Tax (“VTPT”)
From 11 January 2018, a VTPT will be levied on dwellings that are vacant for more than a total of 6 months in a calendar year. The aim of the VTPT is to encourage owners who unreasonably leave their properties vacant to instead make them available for either purchase or rent.
The VTPT only applies to vacant homes in the following municipal councils – Banyule, Bayside, Boroondara, Darebin, Glen Eira, Hobsons Bay, Manningham, Maribyrnong, Melbourne, Monash, Moonee Valley, Moreland, Port Phillip, Stonnington, Whitehorse and Yarra.
The VTPT is self-reporting. That is, owners of vacant residential property will be required to notify the State Revenue Office of any vacant properties that they own. Liability for the VTPT will be triggered on a calendar year basis (like land tax) and will be charged at a rate of 1 per cent of the property’s capital improved value.
In recognition of the fact that there may be legitimate reasons for a property to be left vacant, there will be specific exemptions from the VTPT such as a holiday homes, a city unit for work purposes, deceased estates and homes owned by Victorians temporarily overseas.
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The information on this website is of a general nature only. It is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice about your particular circumstances.
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