From 1 January 2016, if you are an absentee owner, an absentee owner surcharge applies to taxable land you own. For the 2016 land tax year, the surcharge was 0.5 per cent. It is 1.5 per cent from the 2017 land tax year onwards.
The absentee owner surcharge is an additional amount that applies over the land tax you pay at general or trust surcharge rates.
If you are the trustee of an absentee trust that owns taxable land, you must tell us that you are an absentee owner. This is important because penalties may apply if you don’t tell us.
What is an absentee trust?
An absentee trust can be a discretionary trust, a unit trust or a fixed trust, which has at least one beneficiary who is an absentee person:
- In the case of a discretionary trust, the trust has at least one “specified beneficiary” who is an absentee person,
- In the case of a unit trust, the trust has at least one unitholder who is an absentee person,
- In the case of a fixed trust, the trust has at least one beneficiary who is an absentee person and has a beneficial interest in land held subject to the trust
There are different implications for each of the different trust types.
Tracing through trusts
If a beneficiary of a trust (the first trust) is a trustee of another trust (the holding trust), you must determine if the holding trust is an absentee trust. If a beneficiary of the holding trust is an absentee person, the holding trust and the first trust will be absentee persons.
Apex Pty Ltd is trustee of the Apex Unit Trust and owns taxable land in Victoria. The units in the Apex Unit Trust are held by Base Pty Ltd as trustee of the Base Trust, which is a discretionary trust. The specified beneficiaries of the Base Trust are both absentee individuals.
The Base Trust is an absentee trust because it has at least one specified beneficiary who is an absentee person. The Apex Unit Trust, in turn, is an absentee trust because its unit holder is an absentee person. Therefore, Apex Pty Ltd, as trustee of the Apex Unit Trust, will be liable for the absentee owner surcharge.
Figure 1 illustrates this example.