DescriptionThis is a recorded webinar, which covers various aspects of land tax.
Hello and welcome to this On Demand webinar – What is land tax?
My name is Catherine and I’ll be taking you through the presentation.
Today I’ll be taking you through the WHEN, WHAT, WHERE and HOW of land tax.
- WHEN does a land owner become a taxpayer?
- WHAT exemptions are available
- WHERE do site values come from? and
- HOW is land tax calculated?
I’ll also provide you with information about absentee owners, I’ll give you a tour of the assessment, and I’ll tell you how to lodge an amendment or objection.
Let’s start with when does a land owner become a taxpayer. Land tax isn’t paid by everyone. There are close to 3 million properties in Victoria, and less than a third of these properties are taxable.
In a nutshell, land tax applies to those land owners whose total taxable land holdings exceed a threshold amount.
By taxable land holdings I’m referring to land that is not eligible for an exemption, and total refers to the aggregate value of all the taxable land held by that owner, or combination of owners. More about how we arrive at the total taxable value and how we calculate the liability shortly.
It’s possible that an owner may have held property for many years without incurring a land tax liability. However an increase in property site valuations or the removal of an exemption has caused the total taxable value to go above the land tax threshold. And as a result a first time liability arises.
Every year, at midnight on the 31st December land tax liabilities are calculated for the following year. This means that all of the properties in an ownership at midnight on the 31st December 2016 will be included on the 2017 land tax assessment. Properties disposed of after this date remain taxable for the 2017 year, however part of the adjustment process undertaken at settlement may see the incoming purchaser paying some or all of the tax for that property upon the issuing of a land tax clearance certificate. The date of settlement is taken to be the date of the transfer from a land tax perspective. Adjustments are strictly between the owner and the incoming purchaser. The land tax assessment remains unchanged until the following year when the property will be removed from the ownership.
Not all properties are taxable for land tax. For example your home, or ‘principal place of residence’ is generally exempt. If you are building your home and haven’t moved in yet there may be a land tax liability to begin with, however a refund of tax paid on the land can be requested once you have moved into the home, and have been living there for six months. You can find more information about this on our website.
There is also an exemption for land used for primary production purposes, such as dairy farms, cultivating crops etc. To be eligible for the exemption certain conditions must be satisfied dependent on the location of the land. Exemption is available for land that is used primarily for primary production purposes where that land is located either wholly outside greater Melbourne or is wholly or partly within greater Melbourne but not within an urban zone. If land is located wholly or partly within greater Melbourne and is within an urban zone the exemption will apply if the land is used for the business of primary production. Our website contains a detailed map of greater Melbourne that allows you to zoom in and view the Urban Growth Boundary if you're not sure where your property fits in relation to this boundary.
Some other exemptions include land used for health centres, municipal and public land and also caravan parks and retirement villages. Our website provides a full list of the exemptions available in the legislation and detailed information about the conditions linked to each exemption.
If you think you think you may be eligible for an exemption please read the information on our website carefully before requesting an amendment or lodging an objection with us just to make sure you have satisfied the criteria.
Land tax is a tax on the value of land, hence the use of the site value when calculating a land tax liability. Properties in Victoria are revalued every two years and certified by the Valuer-General Victoria. These valuations are provided to the State Revenue Office and applied to the following two years land tax assessments. 2016 was a revaluation year. This means the site values on the 2016/2017 rates notices are used to calculate the 2017 and 2018 land tax assessments.
The Commissioner of State Revenue doesn’t determine or make the valuations – these valuations are provided to the State Revenue Office in accordance with the Land Tax Act. I’ll be covering the process for lodging objections to site values towards the end of this presentation.
Land tax is calculated using a progressive scale of rates. There are four different sets of rates – general rates, rates for surcharge trusts, rates for absentee owners and also absentee trusts. The threshold for land tax in Victoria is $250,000. For surcharge trusts and absentee trusts the threshold is $25,000. If the total taxable land holdings are below these amounts then there is no land tax liability.
The rate that an owner is taxed at depends on the type of owner. For example if a husband and wife purchased an investment property together the land tax liability would be calculated at general rates – however if they held the property as trustees of a discretionary trust, that would then attract the surcharge rate of tax. If the husband and wife were both absentee owners, then the absentee owner trust surcharge rates would apply.
When property is acquired the SRO is notified of the ownership change at settlement via a Notice of Acquisition. In addition trustees are required to submit a Notice of Trust Acquisition, and Absentee Owners need to notify the SRO of their absentee status through our online portal – and I’ve got more on absentee owners shortly.
We calculate land tax by adding a base tax amount, to a percentage of the amount stated in the relevant scale.
Let’s work through an example of the calculation using the general rates.
Here we have a taxpayer with $300,000 worth of taxable land. This could be the site value of a single property, or multiple properties added together. This amount places this taxpayer in the lowest bracket of the scale, which is the $250,000 to $600,000 bracket. The base tax in this bracket is $275, and the rate is 0.2% for every dollar above $250,000 – which equates to 0.2% of $50,000. Adding the base tax to the additional tax gives a total land tax liability of $375.
Where increased property values have pushed a customer into the next bracket a customer will see an increase to their overall liability, as both the base tax and percentage rate increase as the total taxable value moves from one bracket to the next.
To see all of the current land tax rates visit our website sro.vic.gov.au/ltxcurrentrates
A joint ownership exists where two or more owners own land together. It could be made up of individuals, companies or trusts. Jointly held land is assessed in three stages. In the first instance an assessment is issued to the combination of owners as one entity. This assessment is issued to one member of the joint ownership on behalf of the other members. The assessment lists all of the joint owners that the assessment has been issued to.
In the second stage an assessment may issue to the individual owners that include their share of the jointly held land, land owned in their own right and also land owned in other joint ownerships. These assessments are referred to as secondary assessments. The jointly held land is listed again to ensure that the correct total taxable value is used when determining the appropriate tax rate on the secondary assessment.
Now in the third stage, a credit, or joint ownership deduction as we call it is applied to the secondary assessment. This deduction takes into account the fact that the jointly held land has already been assessed at the joint ownership stage. The deduction will be either the share of the tax paid on the joint ownership assessment, or the proportion of the tax payable for that property on the individual assessment – whichever is the lesser of these two amounts.
At a glance it could appear that a property has been incorrectly duplicated. It needs to be displayed again to ensure that the share of the site value is taken into account when determining the total taxable value of the land held by the individual member of the joint ownership.
Let’s move on to the absentee owner surcharge. In 2016, a 0.5 per cent surcharge was introduced for taxable land owned by absentee persons. From the 2017 year, the surcharge is 1.5 per cent.
There are three categories of absentee persons: absentee individuals, absentee corporations and absentee trusts.
An absentee individual is someone who is not an Australian citizen or permanent resident, who was absent from Australia on 31 December of the year prior to the tax year, or was absent for more than six months in total in the calendar year prior to the tax year.
An absentee corporation is a corporation that is either incorporated outside of Australia, or has been incorporated in Australia, but is controlled by an absentee person or persons.
Finally, an absentee trust is a trust where at least one beneficiary or unit holder is an absentee person. There are different implications for each of the different trust types, so you should refer to the absentee owner surcharge page of our website to gain an understanding of how the surcharge may apply. The surcharge does not apply to excluded trusts such as charitable trusts, complying superannuation trusts and administration trusts.
Under the Land Tax Act, absentee owners are required to notify the Commissioner of State Revenue in writing that they are an absentee owner. Notification needs to be made by the 15th January each year. Once notified, the Commissioner will assume that your existing absentee owner status is current unless you notify the Commissioner otherwise.
Ok, now that we’ve gone through the basics of land tax let’s take a look at the assessment. The front page contains important identifying information such as your name, customer number and assessment number. It also contains instalment and payment options.
Page two of the assessment displays the tax calculation – if there are any deductions for jointly held land they will be shown on this page, as well as any overpayments allocated to the assessment. On the right hand side we have some helpful web links for common exemptions, the valuation cycle and objection and amendment processes.
The statement of lands page lists all of the properties held at midnight 31 December 2016, including any interests in jointly owned land. First of all, check that all of your properties are listed – if a property is missing or needs to be removed because you disposed of it before 31 December you need to give us a call so that we can fix the error for you. Also check to see if any exemptions have been applied correctly.
Each property has it’s own address, a unique land ID, a single holding tax figure, a proportional tax figure and a taxable value – which is the site value. The single holding figure is for information purposes only, and reflects the tax amount that would be payable if this was the only property in the ownership. The proportional tax is the actual tax that is payable for this property for the full year.
If an exemption has been applied to the property, the site valuation will be replaced with a code, such as PPR for principal place of residence – and a description of the code will be displayed along the bottom of the page.
When it comes to requesting changes to an assessment there are a number of options. For simple and straight forward changes you can request an amendment. Examples of common amendments are:
- Removing land that you no longer own
- Adding land missing from the assessment
- Applying for a principal place of residence or primary production land exemption or
- Updating your contact details
You should refer to our website to determine whether your amendment needs to be submitted online, or if we can make the change for you over the phone by calling us on 132 161.
The next option is to lodge an objection. Objections are a formal avenue of dispute resolution and give rights of review and appeal. You may object where we have advised that we disagree with you on a matter relating to your assessment. So how do you lodge an objection? Objections must be in writing using Land Tax Objection Form 2B, with full details of the grounds of the objection, and must be lodged within 60 days of the date of issue of the land tax assessment notice.
Finally we have valuation objections. In addition to being able to lodge an objection to a valuation when it appears on a rates notice, you can also object to a site valuation on a land tax assessment.
To object to the value on a land tax assessment it’s very important that you complete and lodge a land valuation objection form within two calendar months of receiving the assessment, and lodge it with the SRO – not directly with the council. The SRO will forward it to the valuer on your behalf, but it must come to the SRO first. There is no extension to the two month period so please make sure to lodge your objection with us during this time or the valuer will be unable to accept it. The objection form and supporting documentation are submitted online.
That’s the end of our presentation. If you need any further information about land tax please visit our website. We have a library of common land tax questions that you can access at sro.vic.gov.au/videos.