Overview Of Land Tax In Victoria

Continuing our series of property taxes in Victoria we review Land tax next.

Land tax is an annual tax on land ownership in Victoria, assessed on the total unimproved (which is the value of the land alone, without considering any improvements) value of taxable land that you own in the state.

It's not a transactional tax (that is triggered with a change of ownership), but rather a holding tax you may have to pay annually if your land holdings exceed a certain threshold.

Land tax in Victoria is managed by the State Revenue Office (SRO). It's based on the combined site value of all land you own in Victoria (excluding exempt land like your home) as at 31 December of the previous year. Your assessment notice is calculated using the site value (SV) of the land, not the value of buildings or improvements.

In Victoria, like other states, the more land value you own the more tax you pay. It is a progressive scale. There are also different thresholds for different owner types (lower thresholds for trusts, for instance).

Tax legislation is frequently reviewed (often annually), for the latest information and thresholds please check the relevant government websites and resources.

Exemptions to Land Tax:

Your principal place of residence in Victoria is exempt from land tax, meaning you don't pay land tax on your own home.

This exemption generally applies automatically when you purchase the property, but you must notify the State Revenue Office within 60 days if your circumstances change, such as moving out, renting the property, or selling it. You can only claim one exemption at a time, and it doesn't apply to properties owned by companies or trusts.

Other exemptions include, agricultural land, armed services personnel, crown land and charities.

When it applies: Land tax is assessed every calendar year based on what land you own on 31 December. The SRO sends out land tax assessment notices typically between January and May.

If the total site value of your taxable land is above the threshold (currently very low due to recent changes – see below), you'll get a bill.

You may have to pay land tax if you own, either individually or jointly with others:

• investment properties, including residential rental properties
• commercial properties such as retail shops, office premises and factories
• holiday homes
• vacant land.

If you own multiple properties, the site values are added together to determine your tax bracket.

Note that recent Victorian budget measures temporarily lowered the tax-free threshold: from 2024, the threshold is only $50,000 of land value ($25,000 for trust-held land). This means almost anyone who owns any property besides their home (even a small block of land) is now subject to land tax. Previously the threshold was $250k, this is due to the introduction of the COVID-19 Debt Repayment Plan and may be reviewed in future years.

Victoria's land tax includes an "absentee owner surcharge" for foreign owners who are not Australian residents. This surcharge is currently 2% of the taxable land value, applied on top of the standard land tax. It applies to individuals, trusts, and companies classified as "absentee" under Victorian law, which can include Australian companies controlled by foreign persons. The surcharge is similar in concept to the Foreign Purchaser Additional Duty (FPAD), but instead of being a one-off transaction tax, it applies annually as part of ongoing land ownership. Land tax obligations can also arise in special cases like trusts, if beneficiaries are nominated it might result in land tax for unit holders depending on circumstances.

You can use a land tax calculator here to find out how much tax you would pay: https://www.sro.vic.gov.au/calculators/land-tax-calculator

Common Issues and risks:

If property values surge, your land tax can jump accordingly. You have the right to object to site valuations (via the local council's process) if you think they're too high, which indirectly affects land tax.

Also, property owners sometimes forget to update their exemptions: for example, if you move out of your home and rent it, it ceases to be exempt as a principal place of residence – you must notify the SRO or you could incur penalties.

Similarly, for farmers, if your land use changes and it no longer qualifies as primary production, you need to notify the SRO.

Another risk area is joint ownership: land tax law aggregates based on owners too. If you co-own properties with different people, the calculations can get complicated.

Trusts – family trusts owning land need to consider a nomination of a beneficiary for land tax purposes or face higher rates.

Lastly, with the threshold now at $50,000.00, even a small piece of vacant land or a parking spot could trigger a tax – some owners will be in the system for the first time in 2024-2025 and may be caught off guard.

Disputing Land Tax

If you receive a land tax assessment that you think is wrong ,maybe the SRO didn't apply your principal place of residence exemption correctly or included land you already sold,a lawyer can assist in sorting that out with the SRO.

How to contest: If your land tax assessment seems incorrect, you have the right to object.

Common reasons to object include:

Site Value: the site value is too high (in which case you actually object via the council's valuer within 2 months of the rates notice – that valuation, if amended, will flow through to land tax); the SRO didn't process your exemption (for instance, you did occupy the property as your home and they failed to exempt it); or a property was counted that shouldn't be (e.g. you sold it before the taxing date).

Objections on valuation must usually go through the valuation objection process. Other objections are lodged with the SRO directly under the Land Tax Act. There's also a process to seek review if, for example, land should have been treated as primary production land.

If you are still unsatisfied after objection, you can go to VCAT. Given the often-significant amount at stake (especially for large landholders or developers with multiple properties), professional advice is recommended to frame the objection correctly with evidence.

State Tax lawyers can help you with any tax disputes and can get results more effectively than speaking to the State Revenue Office directly.

At PCL Lawyers we have extensive expertise in assisting you with any of your legal queries relating to land tax and other tax disputes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.