2021 Victorian Land Tax Assessments - March 2021
This Tax Bulletin outlines recent Victorian land tax developments which may affect your business.
What you need to know
Land tax assessments are generally issued by the Victorian State Revenue Office (SRO) between January and April each year. 2021 land tax assessments have started to be issued by the SRO. Taxpayers should carefully review their land tax assessments and ensure that the SRO is notified of any errors or omissions identified and that any objections to valuations or for other reasons are made within the prescribed period.
| Relevant Area | At a glance |
|---|---|
| Rates of land tax |
Land tax in Victoria is imposed at progressive rates, with a top general rate of 2.25% imposed on land holdings with a total taxable value of $3m or more.
A vacant residential land tax also applies to homes in some inner Melbourne municipalities that are vacant for more than 6 months in the preceding calendar year. |
| Land tax exemptions |
There are various land tax exemptions and concessions which depend on the use and/or ownership of land. Examples include land that is:
|
| Objections | Any objection to a land tax assessment must be made in writing within 60 days from the date of service of the notice of assessment, and should set out in detail the ground(s) for the objection. |
| Notification obligations | If taxpayers identify any errors or omissions in a land tax assessment, they are obliged to notify the SRO within 60 days from the date of service of the notice of assessment. Taxpayers who are absentee owners at 31 December are required to notify the State Revenue Office by 15 January the following year if no previous notification has been given. Penalties may apply if there has been a failure to notify the SRO as required. |
Land Tax Rates
General rates of land tax
The table below sets out the general rates of land tax for the 2021 land tax year.
| Total taxable value of land holdings | land tax payable |
|---|---|
| < $250,000 | Nil |
| $250,000 to < $600,000 | $275 plus 0.2% of amount > $250,000 |
| $600,000 to < $1,000,000 | $975 plus 0.5% of amount > $600,000 |
| $1,000,000 to < $1,800,000 |
$2,975 plus 0.8% of amount > $1,000,000 |
| $1,800,000 to < $3,000,000 |
$9,375 plus 1.3% of amount > $1,800,000 |
| $3,000,000 and over |
$24,975 plus 2.25% of amount > $3,000,000 |
Surcharge rates of land tax for trusts
A trustee is assessed for land tax on the whole of the land subject to the trust as if the land were the only land owned by the trustee (ie the land will not be aggregated with other land owned by that trustee in another capacity either as trustee of another trust or in its own capacity).
A surcharge rate of land tax (subject to some exceptions) is payable on land held on trust.
The surcharge does not apply to an excluded trust or an implied/constructive trust, or if the beneficial interests in the land are notified to the SRO. If the SRO has been notified of the beneficial interests held in the land the subject of a fixed trust or unit trust, the beneficiary (if a fixed trust) or unitholder (if a unit trust) is deemed to be the owner of the land and will be assessed proportionate to their beneficial interest in the subject land, together with any other taxable land owned by the beneficiary/unitholder. The trustee will also liable for land tax at the general rate as if the land were the only land owned by the trustee. However, to avoid double taxation, the land tax payable by the beneficiary/unitholder will be subject to a deduction according to a formula.
The table below sets out the surcharge rates of land tax for trusts for the 2021 land tax year.
| Total taxable value of land holdings | land tax payable |
|---|---|
| < $25,000 | Nil |
| $25,000 to < $250,000 |
$82 plus 0.375% of amount > $25,000 |
| $250,000 to < $600,000 |
$926 plus 0.575% of amount > $250,000 |
| $600,000 to < $1,000,000 |
$2,938 plus 0.875% of amount > $600,000 |
| $1,000,000 to < $1,800,000 |
$6,483 plus 1.175% of amount > $1,000,000 |
| $1,800,000 to < $3,000,000 |
$15,838 plus 0.7614%* of amount > $1,800,000 |
| $3,000,000 and over |
$24,975 plus 2.25% of amount > $3,000,000 |
*The surcharge phases out for landholdings in excess of $1,800,000. For land holdings valued at or over $3,000,000, the surcharge rate is the same as the general rate.
Surcharge rates of land tax for absentee persons
In addition to the general and trust surcharge land tax rates, the absentee owner surcharge of 2% applies to Victorian land owned by an absentee person. Therefore, taxpayers could be liable for land tax up to a top rate of 4.25%.
Broadly, an absentee person is:
(i) an absentee individual – an individual who is not an Australian citizen or permanent resident, does not ordinarily reside in Australia and was absent from Australia on 31 December of the prior year or was absent from Australia for a total of more than 6 months in the prior calendar year;
(ii) an absentee corporation – a corporation incorporated outside Australia or a corporation in which an absentee person holds more than 50% of the shares, or can cast more than 50% of the votes at the corporation's general meeting, or can control the corporation's board composition; and
(iii) trustee of an absentee trust – an absentee trust can be a discretionary trust, a fixed trust or a unit trust in which at least one beneficiary is an absentee person.
Jurisdictional comparison - other states and territories
Absentee or foreign owner surcharge rates of land tax are payable in some other jurisdictions as set out in the table below.
| State / Territory | Surcharge land tax rate |
|---|---|
| ACT | 0.75% on all residential land owned by foreign persons. |
| NSW | 2% on all residential land owned by foreign persons. |
| QLD | 2% on freehold land owned above $350,000 by foreign persons. |
Vacant residential land tax
The vacant residential land tax is 1% of the capital improved value of taxable land.
Land that is exempt from land tax is also exempt from the vacant residential land tax. In addition, other exemptions include:
(i) homes where the ownership has changed during the preceding year;
(ii) homes that become "residential" during the preceding calendar year;
(iii) homes used as holiday homes and occupied by the owner for at least four weeks of the preceding calendar year;
(iv) homes that are occupied by the owner for at least 140 days of the preceding calendar year for the purposes of attending their workplace.
Jurisdictional comparison - Northern Territory
From 1 July 2019, a Property Activation Levy applies to vacant land and ground floor non-residential buildings within a designated zone within the Darwin CBD. The Levy will apply at a rate of 2% for unoccupied, non-residential, buildings based on the unimproved capital value of the property.
A building is "occupied" if at least 50% of the ground level area, that is suitable for exclusive possession, is occupied and being used for its intended purpose.
COVID relief measures
There were a number of COVID land tax relief measures in place in 2020 such as the land tax reduction of 25% if eligible landlords pass on an equivalent amount of rental relief to their tenants and land tax assessment balance deferrals until 31 March 2021 where a landlord privates an effected tenant with rent relief provided landlords demonstrate that:
- all or part of their property is currently available for lease;
- at least one of the tenant's ability to pay normal rent is affected by Covid-19;
- that tenant has < $50m in annual turnover and is eligible for the Federal Government's JobKeep payments; and
- the land tax is directly related to the property for which rent has been reduced.
This relief is also available to land owners who are unable to secure a tenant because of COVID-19.
Land Tax Exemptions
There are a number of land tax exemptions. Some exemptions which are often relevant to our clients include land that is:
- used primarily for primary production;
- used by a charitable institution exclusively for charitable purposes or land that is owned by a charitable institution, is vacant and declared to be held for future use for charitable purposes;
- leased for outdoor sporting, outdoor recreational, outdoor cultural or similar outdoor activities and available for use for one of those activities by the public, and the rent is applied exclusively for charitable purposes;
- owned and used by a non-profit organisation primarily or substantially for sporting activities, outdoor recreational, outdoor cultural or similar outdoor activities and the primary purpose of the non-profit organisation is to conduct such activities;
- used exclusively as a mine (as defined in the Land Tax Act 2005);
- occupied or currently available for occupation, as a residential care facility (within the meaning of the Aged Care Act 1997 (Cth)), residential service (within the meaning of the Disability Act 2006 (Vic)), as a supported residential service (as defined in the Supported Residential Services (Private Proprietors) Act 2010 (Vic)) or a retirement village; and
- land on which a residential care facility, supported residential service, residential service or retirement village is being constructed.
We note that concessional tax rates may also be available in certain circumstances.
Objections
Objections to land tax assessments can be made based on various grounds. Irrespective of the ground(s) of objection, all objections must be made in writing and lodged with the SRO within 60 days from the date of service of the notice of assessment.
Non-valuation objections
If you believe that you have been issued an incorrect assessment, you may lodge an objection or request in writing that an amended land tax assessment be made.
Some examples of the grounds on which an objection or request for an amendment can be made include:
- you are not the owner of the land assessed;
- you believe one of the exemptions or concessions apply to you;
- you believe land should not be grouped for land tax purposes; or
- the assessment is incorrectly calculated.
Valuation objections
If you believe that the valuation of the land assessed is incorrect (ie. too high), the ground(s) on which you may lodge a valuation objection include:
- the value assigned it too high or low;
- the interests held in the land are not correctly apportioned;
- the apportionment of the valuation is incorrect;
- lands which should be included in one valuation have been valued separately;
- lands which should be valued separately have been included in one valuation; or
- the area, dimensions or description of the land are incorrect.
Valuation in rates notice
We note that the first indication of new valuation of land can be found in your rates notice, not on your land tax assessment notice. Your rates notice is issued around the middle of the previous year so you can object earlier.
Fire Services Property Levy
We note that the valuation from your rates notice is also used to calculate your liability in respect of the Fire Services Property Levy (FSPL). You have the opportunity to object to the classification (which determines the rate of the FSPL that applies to the property) that is adopted for the FSPL purposes. However, you must do so within 60 days of receiving your rates notice.
Obligation to Notify
Errors or omissions
If you have identified errors or omissions in your land tax assessment, you are required to notify the SRO within 60 days from the date of service of the notice of assessment. This includes if:
- you own additional land which has not been included in your assessment;
- you receive two or more assessments for different lands which are solely owned by you;
- the trust or absentee surcharge was not applied when it should be; or
- you have received an exemption for which you are not eligible.
Failure to notify the SRO within the prescribed time period may result in a 25% penalty tax on the additional amount of tax for which you should have been assessed.
Absentee owners and owners of vacant residential property
If you are an absentee owner as at 31 December or owner of a property that was unoccupied for more than 6 months during 2020, you were required to notify the SRO (via its online Notification Portal) before 15 January. Once notified, your land tax assessment will include the absentee owner surcharge or vacant residential land tax. The SRO will continue to assume that you are an absentee owner until you notify them otherwise, however a notification in respect of the vacant residential land tax has to be made each year.
Failure to notify the SRO that you are an absentee owner or owner of vacant residential premises as required may result in penalty tax being imposed on the surcharge amount assessed, ranging from 5% (if a voluntary disclosure is made before an investigation commences) to 90% (if an investigation commences and it is concluded that there has been an intentional disregard of the law and the investigation has been hindered).
Refunds
You may claim a refund of overpaid land tax of up to 5 years after the date of the overpayment. If the Commissioner refuses to grant the refund or does not respond within 3 months of the refund application, you have the right to initiate court proceedings within 3 months.
For taxpayers that pass on the land tax to the tenant on the land, the refund amounts obtained from the SRO be passed back to the tenant to ensure no "windfall gain".
Authors: Geoff Mann, Partner; and Alice Kim, Associate.
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