Land tax is assessed on the unimproved value of most types of land ('taxable land') owned on 31 December each year.
Overview
Main legislation
Land Tax Act 2005 (Vic) and the Taxation Administration Act 1997 (Vic) (which contains provisions for the administration and enforcement of Victoria's taxation laws)
Note that the summary provided here only relates to Victorian land tax (each Australian state has its own land tax legislation).
A progressive scale of land tax rates applies (the higher the value of taxable land, the higher the effective tax rate). Higher effective tax rates can also apply in the case of land held in trusts ('trust surcharge rates') and land held by 'absentee'/foreign individuals or entities (in which case the 'absentee owner surcharge' generally applies).
For the 2024 land tax year, the top rate of standard land tax is 2.65% p.a. and the 'absentee owner surcharge' rate is 4% p.a. (meaning a top rate of 6.65% p.a. for absentee owners of land).
Where an individual or company holds more than one parcel of taxable land, the taxable value of all parcels will generally be aggregated for the purposes of applying the progressive scale of land tax rates.
Further, related corporations can often be grouped for the purposes of applying the progressive scale of land tax rates.
Various land tax exemptions are available in certain circumstances (e.g. for a principal place of residence, primary production land, retirement villages and land used and occupied by charitable institutions exclusively for charitable purposes). However, these exemptions are subject to satisfying strict criteria.
Land tax claims
Clients sometimes pursue practitioners, alleging that an unexpected land tax assessment or arrears of land tax arose due to the practitioner's failure to provide proper advice or failure to provide correct details to the SRO.
A common scenario is when a client does not inform the practitioner that the purchaser of the land is acting in a trustee capacity (e.g. for a discretionary trust, unit trust or superannuation fund). As a result, a 'notice of trust acquisition of an interest in land' is not lodged with the SRO as required. When the trustee capacity is detected by the SRO at a later point, land tax arrears (potentially with penalties) can be assessed.
To prevent these oversights, it is crucial to ask the client if they are buying the property in a trustee capacity.
No adjustment of Land Tax from 1 January 2024
The Sale of Land Act 1962 (Vic) has recently been amended to include a new section 10G, which generally prohibits a vendor from seeking to adjust/apportion for land tax in contacts of sale entered on or after 1 January 2024. However, this prohibition does not apply if the sale price including GST exceeds $10 million (to be indexed annually).
More info on land tax
Actions to reduce risk
- Look for the tax and duty implications associated with the transfer of real property and associated transactions (like share transfers) to alert clients and, if appropriate and required, provide advice or direct the client to seek expert advice.
- Read the guidance and the information provided to improve your understanding and awareness.
- Identify complexities beyond your expertise and refer clients for expert advice.
- Use a checklist or prompt at the start of a matter to identify tax and duty issues.
- Always check the details in the legislation and SRO guidelines before advising clients and keep records to confirm any advice given.
- Establish, update and maintain comprehensive advice letters and resources that you can adapt for each specific client matter to ensure relevant advice is given to clients and confirmed in writing.
- Maintain a focus on tax and duty in all property and property conveyancing matters.
