Land tax is becoming an increasing issue for property owners. Victorian government land tax receipts have increased from $1.793 billion in the 2015/6 financial year to a projected $6.5 billion in the current financial year – a 360% increase over a period in which the median house price rose 61%.
In this newsletter I want to explore some exemptions and concessions that may be available and how some steps now or some knowledge might reduce your 2027 land tax bill. The list below is not exhaustive – but rather designed to raise key concepts. The intention is to provide food for thought – please ensure that you obtain tailored advice in relation to your specific circumstances.
As a starting point – 2027 land tax will be calculated based on property ownership as at 31 December, 2026. Delaying a purchase settlement or bringing forward a sale might help reduce your land tax.
Principal Place of Residence
In simple terms your principal place of residence is exempt from land tax.
However, there are a range of requirements and restrictions in relation to the principal place of residence exemption. These include:
- You may only have one principal place of residence in Australia at a time (subject to some exceptions);
- The exemption is limited to one title – so the adjoining block you use as a garden may need to be consolidated to reduce land tax;
- The exemption won’t usually apply if the property is in the name of a company or trust.
Holiday homes are not exempt from land tax – although if you spend more time at a ‘holiday home’ that is worth more than your city residence it might be worth considering changing your principal place of residence.
If you buy a new principal place of residence before you sell the old one – you may be entitled to claim the exemption during the period of the overlap. If you are absent from your principal place of residence due to building work you may still be entitled to the exemption.
If you move and rent out your principal place of residence you are supposed to notify the State Revenue Office. If you don’t they will generally pick it up when a residential bond is lodged with the Residential Tenancy Bond Authority.
If you move from your principal place of residence into supported care – you may still be able to claim the principal place of residence exemption.
Primary Production Land
An exemption from land tax for primary production land outside greater Melbourne is available.
Primary production is defined to include cultivating crops and maintaining animals for the purposes of selling them, their offspring or produce.
However, you need to be mindful of the precise terms of the exemption.
Using land to keep horses won’t be primary production if you are using the horses for show jumping or other personal purposes. The land may be exempt if you are getting paid to keep the horses of others or you are breeding horses for sale.
Land maintained for a dam may not be exempt if the intention is that it is a nature reserve – but may be exempt if the dam is maintained for the purposes of supporting the maintenance of animals or crops.
Rooming Houses
Rooming Houses can be exempt from land tax. However, there are prerequisites including:
- The property must be registered as a rooming house;
- 80% of residents must be in occupation for 3 months or more;
- The room rates are below the prescribed maximum.
In addition, if the rooms have their own kitchen facilities they may fall outside the definition of rooming house.
Land Sold under Vendor Terms Contracts
Where a residential property has been sold under a vendor terms contract – the property should be exempt from land tax.
It is required that the property has been sold to a bona fide third party purchaser and the contract wasn’t entered into for the purposes of avoiding land tax.
The exemption is usually claimed by lodging an exemption – which can be a protracted exercise.
The Importance of Advice
It seems that each year land tax becomes both more expensive and also more technical.
At Lewis O’Brien & Associates we encourage clients to carefully consider the tax implications of their property purchases before settlement as well as trying to help clients to reduce avoidable land tax.
If you wish to discuss your land tax situation and / or whether you might be entitled to lodge an objection you can schedule a time with Lewis O’Brien by clicking HERE to start the process.
The Most Ridiculous Thing
I just read that the powers that be have prescribed new rules to help me comply with the AML / CTF requirements.
Speaking for myself – I perceive that the problem I have is too many rules and I don’t see how more rules assist me?
Lewis O’Brien
Your Preferred Property Lawyer