Do you own a property in Victoria? If yes, then as a property owner, you may need to pay land tax. For investment properties, commercial properties, holiday homes or vacant lands, the owners are responsible for paying land tax.
The land tax has certain exemptions and concessions only for certain kinds of property. To help you learn about these, along with how this tax works, here is a guide on land tax in Victoria.
Land tax – how does it work?
You will have to pay land tax once the total taxable value of all the land you own in Victoria exceeds $300,000 on 31 December. The land could be individually or jointly owned. If it has gone above $300,000, you pay the said tax.
The total taxable value of land owned by you does not include the exempt land. When it comes to the rate of land tax, it is influenced by the total taxable value of the owner’s every piece of taxable land.
Land tax is not to be confused with the vacant residential land tax. The vacant residential land tax applies to homes that were left vacant for more than six months and only applies to inner and middle Melbourne.
In order to calculate land tax for the current year, the site value of every taxable land you had under your name on 31 December of the previous year is calculated.
What land is taxed?
Any individual that owns one or more of the following land, individually or with others, has to pay land tax:
- Investment property (including residential rental properties)
- Commercial property or properties (like factories, office premises and retail shops)
- Holiday home
- Vacant land
Who is a land owner?
The land owner does not necessarily have to be a person. Land owners can be trustees or companies as long as they fulfil the following requirements:
- hold the freehold title to that land
- hold the lease of Crown land
- hold a Crown land license with either a conditional or an absolute right to acquire the land
- are beneficiaries or unitholders of specific trusts
- are a life tenant
For specific instances of selling the land, the incoming owner and the existing owner are deemed the owners for land tax purposes.
Also, the deceased estate’s personal representative may have to fulfil the land tax obligations when the administration period arrives.
Owning land with others
What if I owned land with other people?
Irrespective of the ownership structure under which you own land with other people, you are considered the joint owner. However, each combination of owners is unique and, thus, is treated as a different joint ownership. Joint owner assessments are different from general land tax assessments.
Exempt land – what land is exempt?
Do you wish to seek an exemption from land tax in Victoria? Specific criteria for exemption exist, and if you fulfil them, you do not have to pay land tax.
Here are some of the exemptions:
Primary place of residence
The owner does not need to pay land tax on the primary residence. It is also called PPR or primary place of residence.
Primary production land
The farm you own, also known as PPL or primary production land, is exempt from land tax.
Other Exemptions
Other exempt lands include charitable institutions, rooming houses, land owned by government bodies, land owned by special ability trusts, land used for different types of mining and more.
The exemptions and concessions are subject to change with time, and some conditions might have to be met.
Do I have to pay land tax?
Are you liable to pay land tax?
Generally, the owners whose overall taxable value of all the Victorian land they own, either individually or jointly, exceeds or is equal to $300,000 on 31 December need to pay land tax.
However, you can use the online tool provided by the State Revenue Office (SRO) to determine if you are liable to pay land tax. This tool will provide some general guidance on the circumstances in which the tax needs to be paid, as well as the thresholds and exemptions to help you remove or reduce the land tax.
While buying or selling a property, how can you know if the land tax is owed on it or not? A property clearance certificate (or a land tax clearance certificate as it was called before) is what you use to figure this information out.
The SRO has stated that the land tax is not adjusted for any property sold, bought or settled during an assessment year. The one who owns the land on 31 December is liable to pay the assessment for the coming year.
Land Tax Assessment
You or your authorised representative should receive the land tax assessment every year between late January and late May.
Your land assessment notice should list the following:
- All the Victorian land owned by you, including the jointly owned land
- Interest in any land you held in a trust
- Any exemption that may be applicable
- Site valuation for every piece of land you own
Land tax is calculated by an appropriate land tax rate applied to the total taxable value of the owner’s land holdings.
When are land tax assessments issued?
Although it is expected for the owner or their authorised representative to receive the land tax assessment between late January and late May, you may receive one outside this timeframe.
For instance, suppose the principal place of residence exemption was applied incorrectly to your land. Now, reassessments will be issued (which can be outside of that timeframe) to recover the land tax you had to pay for the current and previous years.
Received an assessment – What’s next?
In an individual’s land tax assessment, every Victorian land should be listed, which includes your interest in jointly owned and exempt land. This ownership listed would be till 31 December of the previous year.
If you have your own home, it will be highlighted as your PPR or principal place of residence.
You will need to check the assessment to confirm that every detail filled in it is correct, including:
- Every piece of land you own has been listed
- You have received only the exemptions you were eligible for
- A land that has been sold by you is not included
- Any piece of land eligible for an exemption has been marked as exempt, which includes your principal place of residence.
What if there’s a mistake in land tax assessment?
It is not unusual for any mistakes to be present in your assessment. For mistakes in the property ownership information, you have to lodge an amendment request to the State Revenue Office (SRO).
However, you have to detect these errors quickly to lodge an amendment because you only have 60 days after the date you received a land tax assessment. After this period, you may have to pay a penalty tax.
If there are no errors, you can pay the assessment.
More than one land tax assessment
The different types of land tax assessments you may receive are explained here. These are also specific in numbers, so you have to be attentive to the number of different types of assessments you receive.
Individual assessment
This assessment should only be one, i.e., you should only get one individual assessment for the individually owned properties. However, if you have received more than one, you should let the authorities or the SRO immediately to help them keep the correct record of the land you own.
Joint assessment
In addition to your individual assessment, you may receive one or even more than one joint assessment if you have joint ownership.
Since every unique combination of owners is considered entirely different joint ownership, the people who are a member of more than one joint ownership will receive more than one joint assessment.
The person receiving it receives it on behalf of other joint owners. In case you end up receiving more than one joint assessment for a single unique joint ownership, you have to contact the SRO.
Trust assessment
If you own a piece of land as the trustee of a trust, you will receive a separate trust assessment for every trust you are a trustee for.
In each trust assessment, the name of the trust must be specified, and if it is not, contact the SRO.
Common errors
Although errors are nothing new, making one when it comes to land tax may lead you to some penalties. So to help you be aware of these, here are a couple of common errors in land tax:
- Not informing the authorities that the property for which PPR (principal place of residence) exemption has been claimed is leased;
- Making an incorrect primary production land exemption claim when the land is used as a hobby farm or not for profit;
- Incorrectly listing the type of trust or not listing ownership by a trust;
- Not notifying the authorities of a change in land use;
- Not informing the SRO about the land holdings, including part interests in land;
- Incorrectly declaring a foreign person’s status.
As an owner of land or pieces of land, you have to check whether you need to pay the land tax. In case you are having some difficulties understanding your obligations, contact Clear Tax Accountants, Melbourne. Our registered tax agent can help you know your tax obligations and advise you on your tax matters.
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