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If you are an absentee owner, an absentee owner surcharge applies to taxable Victorian land you own. This surcharge is 1.5 per cent from 1 January 2017 (previously 0.5 per cent).

The surcharge is an additional amount that applies over the land tax you pay at general and trust surcharge rates

If you are a trustee of an absentee unit trust that owns taxable land, you should tell us as soon as possible via our Absentee Owner Notification Portal. This is important. Penalties may apply if you don’t tell us.

A unit trust is an absentee trust if at least one unitholder is an absentee person. The absentee unitholder can be a trustee of an absentee trust, an absentee corporation or an absentee individual.

Land tax for an absentee unit trust

The amount of land tax payable by a trustee of an absentee unit trust depends on whether the trustee has notified us of the unitholders or has nominated a PPR beneficiary.

Trustee has not notified us of the unitholders

Where no notification is made, the trustee of an absentee unit trust will be assessed land tax as follows:

  1. At the trust surcharge rates on the trust land, plus
  2. At the absentee owner surcharge rates on the trust land multiplied by the proportion of units held by the absentee unitholders

Land tax trust surcharge

Example 1

Adam Pty Ltd is trustee of the Adam Unit Trust, which owns taxable land in Victoria. Adam Pty Ltd has not made a notification of the unitholders of the trust. Therefore, it will be liable to the trust surcharge rate of land tax.

The unitholders of the Adam Unit Trust are Jack and Jill, who each hold 50 per cent of the units. Jack is an absentee person and therefore the Adam Unit trust is an absentee trust. Neither Jack nor Jill otherwise owns land.

Adam Pty Ltd’s land tax liability

In 2016, the taxable value of the land held under the Adam Unit Trust is $600,000 and the absentee owner surcharge is 0.5 per cent. The land tax payable by Adam Pty Ltd is assessed as follows.

  • Step 1: Land tax is assessed on the trust land at the trust surcharge rate. The trust surcharge rate for land with a taxable value of $600,000 is $2938.
  • Step 2: The proportion of units held by the absentee beneficiary (Jack) is multiplied by the absentee owner surcharge of 0.5 per cent for 2016. As 50 per cent of the units are held by Jack, the absentee owner surcharge assessed is $600,000 x 0.5 per cent x 50 per cent = $1500.

The total land tax assessed for Adam Pty Ltd on the trust land is $2938 + $1500 = $4438.

Trustee has notified us of the unitholders

Where a notification has been made, the trustee of an absentee unit trust will be assessed land tax on the trust land as follows:

  1. At the general land tax rate on the trust land, plus
  2. At the absentee owner surcharge rate on the trust land which is deemed to be owned by the absentee unitholders

The unitholders which are absentee owners will pay land tax based on the absentee owner surcharge rates, while the unitholders that are not absentee owners will pay land tax based on the general rates. The unitholders will be entitled to a deduction for the tax that has been paid by the trust.

Example 2

Using the same details as the example above, except that Adam Pty Ltd had made a notification of the unitholders of the trust. Therefore, Jack and Jill are each deemed to be the owner of the trust land (in addition to the trustee) for land tax purposes, in proportion to their unitholdings in the trust. That is, Jack and Jill are each deemed to be the owner of 50 per cent of the trust land.

Adam Pty Ltd’s land tax liability

The land tax assessed for Adam Pty Ltd is calculated as follows. 

Land tax calculated at the general rate for land with a taxable value of $600,000 is $975.

  • Step 2: The taxable value of the land that is deemed to be owned by the absentee unitholder (Jack) is multiplied by the absentee owner surcharge of 0.5 per cent for 2016. As 50 per cent of the trust land is deemed to be owned by Jack, the taxable value deemed to be owned by him is $300,000.

The absentee owner surcharge assessed is $300,000 x 0.5 per cent = $1500.
The total land tax assessed for Adam Pty Ltd on the trust land is $975 + $1500 = $2475.

Jack’s land tax liability

The land tax assessed on Jack (as deemed owner and absentee unitholder) is calculated as follows.

  • Step 1: Land tax is assessed on the trust land deemed to be owned by the absentee unitholder at the general absentee owner rate of land tax. The 2016 general absentee owner rate for land with a taxable value of between $250,000 and $600,000 is $1525 plus 0.7 per cent of the amount over $250,000.

The tax assessed is $1525 + (($300,000 - $250,000) x 0.7 per cent) = $1875.

  • Step 2: A deduction is applied to avoid double taxation, being the lesser of:
  1. The taxable value of the trust land deemed to be owned by Jack x tax assessed on the trustee (excluding the absentee surcharge) (i.e. 50 per cent x $975 = $487.50) plus the taxable value of the trust land deemed to be owned by Jack x 0.5 per cent (i.e. $300,000 x 0.5 per cent = $1500), (i.e. $487.50 + $1500 = $1987.50), or
  2. The taxable value of the trust land deemed to be owned by Jack / taxable value of all land owned by Jack x tax assessed for Jack (i.e. $300,000 / $300,000 x $1875 = $1875).

The lesser of the two calculations is $1875. No tax is payable by Jack after applying the deduction (i.e. tax assessed $1875 less deduction of $1875 = $0).

Jill’s land tax liability

The land tax assessed on Jill (as deemed owner) is calculated as follows.

  • Step 1: Land tax is assessed on the trust land deemed to be owned by the unitholder at the general rate of land tax. The general rate for land with a taxable value of between $250,000 and $600,000 is $275 plus 0.2 per cent of the amount over $250,000. The tax assessed is $275 + (($300,000 - $250,000) x 0.2 per cent)) = $375.
  • Step 2: A deduction is applied to avoid double taxation, being the lesser of:
  1. The taxable value of the trust land deemed to be owned by Jill x tax assessed on the trustee (excluding the absentee owner surcharge) (i.e. 50 per cent x $975 = $487.50), or
  2. The taxable value of the trust land deemed to be owned by Jill / taxable value of all land owned by Jill x tax assessed for Jill (i.e. $300,000 / $300,000 x $375 = $375)

The lesser of the two calculations is $375.50. No tax is payable by Jill after applying the deduction (i.e. tax assessed $375 less deduction $375 = $0).

Example 3

Beta Pty Ltd is trustee of the Beta Unit Trust, which has issued 100 units. The unitholders are Harry, who holds 25 units, Larry who holds 15 units, and Barry who holds 60 units. Harry and Larry are absentee individuals.

Beta Pty Ltd must notify us that the Beta Unit Trust is an absentee trust and that the percentage of the units held by absentee persons is 40 per cent. Each unitholder of a unit trust who is an absentee person and has received their own land tax assessment must also make a separate notification.

Tell us if you are an absentee owner

If you are an absentee owner at 31 December, you must tell us before 15 January of the following year using our Absentee Owner Notification Portal.

​You will also need to provide a percentage of the units that are held by absentee unitholders. This is calculated as a proportion of the total number of units held by absentee unitholders as a proportion of the total number of units held by all unitholders of the unit trust. 

Once you have notified us that you are an absentee owner, your land tax assessments will include the absentee owner surcharge. Further, we will assume that your absentee owner status is current until you tell us otherwise.

Access the portal

Failing to tell us you are an absentee owner is a notification default under the Taxation Administration Act 1997. When this happens, you will be liable for penalty tax on the surcharge amount assessed, in accordance with our revenue ruling on penalty tax and interest. This may be penalty tax of:

  • 5 per cent if you voluntarily tell us that you are an absentee owner before we start investigating you,
  • 20 per cent if you tell us you are an absentee owner after we start an investigation, and
  • Up to 90 per cent if we believe that you intentionally disregarded the law and hindered our investigation

Changes to your absentee owner status

From 1 October 2016, you can notify us of any change in your absentee owner status by updating your details through our Absentee Owner Notification Portal.