This year, because of higher land tax rates and increased valuations being ascribed to properties, taxpayers are seeing some substantial increases to their land tax liability.
How is land tax calculated?
Land tax is an annual tax that is applied on the total taxable value of all the land you own in Victoria. Land tax is calculated on the ‘site value’ (i.e unimproved value) of all taxable land you own as at midnight on 31 December each year. Land tax is calculated on a sliding scale (the higher the aggregated land value, the higher the rate).
The general rates for the 2024 Land Tax year are set out below.
Total taxable value of landholdings
|
Rate
|
| < $50,000 |
Nil |
| $50,000 to < $100,000 |
$500 |
| $100,000 to < $300,000 |
$975 |
| $300,000 to < $600,000 |
$1350 plus 0.3 per cent of amount > $300,000 |
| $600,000 to < $1,000,000 |
$2250 plus 0.6 per cent of amount > $600,000 |
| $1,000,000 to < $1,800,000 |
$4650 plus 0.9 per cent of amount > $1,000,000 |
| $1,800,000 to < $3,000,000 |
$11,850 plus 1.65 per cent of amount > $1,800,000 |
| $3,000,000 and over |
$31,650 plus 2.65 per cent of amount > $3,000,000 |
For example, if your taxable land value is greater than $3m, the rate of land tax is $31,650 plus 2.65 per cent of the value that exceeds $3m.
A surcharge rate applies to land held on trust however this becomes the same as the general rate where land exceeds a taxable value of $3m.
In addition to land tax calculated at the general rate, the absentee owner surcharge (AOS) and vacant residential land tax can apply.
Absentee owner surcharge (AOS)
The AOS is a surcharge rate that applies to land that that is owned by an absentee person, absentee corporation, or absentee trust. These terms are broadly defined and aimed at imposing a surcharge on foreign interests (e.g foreign corporations, foreign trusts and foreign individuals).
For example, where an Australian company is indirectly or directly controlled or owned by a foreign corporation (i.e. has more than half of its shareholders as foreign), the AOS will apply in addition to and on top of land tax that is payable at general and surcharge rates and applies to all land regardless of whether it is residential or commercial. For the 2024 land tax year, the AOS is 4 per cent.
Vacant residential land tax
For the 2024 land tax year, vacant residential land tax applies to homes in inner and middle Melbourne that were vacant for more than six months in the preceding calendar year. This tax is different to land tax, the AOS and the federal annual vacancy fee. For the 2024 land tax year, the vacant residential land tax is 1 per cent of the capital improved value of land.
Why is my land tax assessment so high compared to previous years?
Land tax is calculated using site values, which are determined by the Valuer-General Victoria on all taxable land you owned as at midnight on 31 December of the year preceding the year of assessment.
The relevant rate (general rate or rate for trusts and AOS if applicable) is then calculated on the aggregated land values. As this is an annual valuation process, the site value of land in your 2023 assessment is likely to differ from the site value included in the 2024 assessment.
In 2023, the Victorian Government also introduced a COVID Debt Repayment Plan which resulted in a number of temporary changes to land tax. The most significant change was that in addition to a flat surcharge of $975, an increased rate of land tax by 0.10 percentage points applies to land over $3m. In addition, last year’s State Budget announced an increase to the AOS for foreign owners from 2 per cent to 4 per cent. All of the above factors in combination may explain any significant increases in the 2024 Land Tax Assessment.
Am I eligible for an exemption?
There are a number of exemptions that may be available. Whether an exemption applies will depend on the use of the land and in some cases, the identity of the owner.
Examples of exemptions and concessions for land tax that are often relevant for our clients include:
- Primary production
- Charitable institutions and purposes
- Retirement village / residential care (including during the construction period)
- Health services
- Build-to-rent housing
- Sporting, recreational and cultural purposes
- Principal place of residence
- Construction / renovation of principal place of residence
The exemptions/concessions are generally not automatic and must be applied for. It is also important to bear in mind that land tax is primarily concerned with the use of land rather than its ownership.
Therefore, if land is being leased, the activities carried out by the tenant on the land can also be relevant when assessing the availability of those exemptions/concessions.
The land value ascribed to my property is too high. Can I object?
If you consider the land value in your assessment too high, or if you have a valid ground of objection on non-valuation grounds, it is possible to object to the land tax assessment.
Common non-valuation grounds include:
- you are not the owner of the land assessed;
- you believe one of the exemptions or concessions apply to you;
- if the land is owned by a company, you believe the land should not be grouped for land tax purposes; or
- the assessment is incorrectly calculated.
Irrespective of the ground or grounds 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. Failure to lodge by this date can result in your objection not being considered.
There is an error in my assessment. Do I have to notify the SRO?
If you have identified errors or omissions in your land tax assessment, you are required to notify the SRO within 60 days. Failure to do so can result in penalty tax being applied to your assessment.
This includes if you own additional land, which has not been included in your assessment or if you receive an exemption which you are no longer eligible for.
We’re here to help
If you have any queries in relation to your 2024 Land Tax Assessment or are considering lodging an objection to your assessment, please contact a member of the Grant Thornton team.
Learn more about how our Stamp duty & land tax services can help you
