If you are an absentee owner, an absentee owner surcharge applies to the taxable Victorian land you own. The surcharge is an additional amount that applies over the land tax you pay at general and trust surcharge rates.
This surcharge is 4% from the 2024 land tax year (previously 2% for the 2020-2023 land tax years, 1.5% for the 2017-2019 land tax years, and 0.5% for the 2016 land tax year).
An absentee owner includes the trustee of an absentee discretionary trust. If you are the trustee of an absentee discretionary trust that owns taxable land on 31 December, you must tell us that you are an absentee owner before 15 January the following year. This is important because penalties may apply if you don’t tell us.
A discretionary trust is an absentee trust if it has at least one specified beneficiary who is an absentee person. A specified beneficiary is a beneficiary who may receive income or property from the trust and is specifically named in the trust deed that establishes the discretionary trust. A discretionary trust is also an absentee discretionary trust if a specified beneficiary of that trust is acting as trustee of an absentee trust.
A specified beneficiary is not the same as a taker in default. However, it could be the same person. A taker in default is usually identified in the trust deed in the taker in default clause. A taker in default will take any trust capital that has not been allocated to a beneficiary when the trust is terminated.
Land tax for absentee discretionary trusts
The amount of land tax payable by a trustee of an absentee discretionary trust depends on a number of factors, including whether the trust land was acquired before 2006, whether there is a nominated beneficiary in place and whether there is a nominated PPR beneficiary in place.
The nominated beneficiary of a discretionary trust may or may not be a specified beneficiary. To determine whether a discretionary trust is an absentee trust, the focus is on the status of the specified beneficiaries, not the nominated beneficiary.
Example 1
Foxtrot Pty Ltd is trustee of the Foxtrot Family Trust, which is a discretionary trust, and it owns taxable land in Victoria. The land was acquired in 2004.
The specified beneficiaries of the trust are Frank and Felicity. The class of general beneficiaries include the parents, children, brothers and sisters of the specified beneficiaries.
Foxtrot Pty Ltd had nominated Fay (Frank’s child) as the nominated beneficiary within the relevant time frame. Fay is deemed to own the trust land (in addition to Foxtrot Pty Ltd).
To determine whether the Foxtrot Family Trust is an absentee trust, the status of Frank and Felicity is relevant. The status of Fay is not relevant because she is not a specified beneficiary.
Trustee has not nominated a beneficiary
Where there is no nominated beneficiary in place, the trustee of an absentee discretionary trust will be liable for land tax on the trust land at the land tax surcharge rates for absentee trusts.
Example 2
Zulu Pty Ltd is trustee of the Zulu Family Trust, which is a discretionary trust that owns taxable land in Victoria. The land was acquired in 2012 and therefore Zulu Pty Ltd is not able to nominate a beneficiary.
The specified beneficiaries of the trust are Zane and Zoe. Zoe is an absentee individual and therefore the Zulu Family Trust is an absentee trust. The trust land will also be liable for the absentee owner surcharge.
Therefore, the land tax payable by Zulu Pty Ltd is assessed at the trust surcharge rate of land tax for absentee trusts.
Trustee has nominated a beneficiary
If the trust land was acquired before 2006, the trustee could have nominated a beneficiary for land tax purposes by the relevant date. If a trustee had made a nomination of a beneficiary, the trustee is assessed at the general absentee owner surcharge rates.
The nominated beneficiary is deemed to be the owner of the trust land (in addition to the trustee) and is separately assessed on that land plus any other land they may own. To avoid double taxation, the nominated beneficiary is entitled to a deduction for the land tax paid by the trust.
Example 3
Using the details in example 2 above, except that the land was acquired in 2005 and Zulu Pty Ltd has correctly nominated a beneficiary. The trustee will be assessed at the general absentee owner surcharge rates of tax on the pre-2006 land.
The nominated beneficiary will also be assessed on the trust land less a deduction to avoid double taxation. If the nominated beneficiary is an absentee person, they will be assessed at the general absentee owner surcharge rates of tax. If the nominated beneficiary is not an absentee person, they will be assessed at the general rates of tax.
If the nominated beneficiary does not own any other land (including as deemed owner), they will not be liable to any tax because the deduction will offset the tax payable.
Trustee with nominated beneficiary and holds both pre and post-2006 lands
A trustee of an absentee discretionary trust with a beneficial nomination in force that holds both pre and post-2006 lands is to be assessed at the absentee general and absentee surcharge rates for each of those lands respectively in proportion to its total taxable landholdings.
The statutory formula is given as follows:
L = [(R1 × T) × (A ÷ T)] + [(R2 × T) × (B ÷ T)]
Where:
- L is the land tax assessed for the trustee
- R1 is the applicable rate of land tax set out in Part 4 of Schedule 1
- R2 is the applicable rate of land tax set out in Part 5 of Schedule 1
- T is the total taxable value of all taxable land subject to the trust
- A is the total taxable value of the pre-2006 land subject to the trust
- B is the total taxable value of the post-2006 land subject to the trust.
Example 4
Using Example 1 above, where Foxtrot Pty Ltd has a beneficial nomination in force and the taxable value of its pre-2006 land acquired in 2004 is $1.2 million. Assuming Foxtrot Pty Ltd acquires further land as trustee of the Foxtrot Family Trust in 2023 and the taxable value of the new land is $1.3 million.
Foxtrot Pty Ltd will be assessed as trustee in the 2024 tax year as follows:
[($83,850 + (5.65% × ($2,500,000 - $1,800,000)) × ($1,200,000 ÷ $2,500,000)] + [($90,363 + (5.1072 × ($2,500,000 - $1,800,000)) × ($1,300,000 ÷ $2,500,000)]
[($83,850 + $39,550) × 0.48] + [($90,363 + $35,750.40) × 0.52]
$59,232 + $65,578.97
$124,810.97
Trustee has nominated a PPR beneficiary
If a PPR beneficiary nomination is in force, the trustee is assessed at the general absentee owner surcharge rates of land tax on the land used and occupied by the PPR beneficiary. The trustee is assessed at the trust surcharge rate with absentee owner surcharge on all the other trust land.
From the 2024 to 2033 tax years, a COVID-19 debt temporary surcharge applies to the land tax payable by the trustee where a PPR beneficiary nomination is in force.
Tell us if you’re an absentee owner
If you are an absentee owner at 31 December, you must tell us before 15 January of the following year.
Changes to your absentee owner status
Notify us of any change in your absentee owner status by updating your details through our Absentee Owner Notification Portal. You can do this at any time but if there is a change in status at 31 December, you must tell us before 15 January of the year after, using our portal. If you cannot access the portal, call us on 13 21 61.
