Land Tax – am I paying too much?

Property & Development 4 January 2021

Land Tax is payable annually by any person who owns property in Victoria with a total site value in excess of $250,000.00. There are a range of exemptions which are applicable under the Land Tax Act 2005 (Vic) that may completely exempt a land owner from Land Tax, or significantly reduce the total amount of Land Tax that they are liable to pay. Some of these exemptions and concessions include (but are not limited to) the following:

  • Principal Place of residence;
  • Primary production land (farming)
  • Charities;
  • Rooming houses;
  • Recreational or sporting land owned by not for profit organisations; and
  • Caravan parks;

Land is assessed for Land Tax as of 31 December each year. A Land Tax Assessment Notice is then issued sometime between January and May the following year. Land Tax Assessment Notices are issued in relation to Land Tax payable for the year preceding.  If you are seeking to claim a Land Tax exemption or concession, it is prudent to ensure that sufficient evidence is available and provided to the State Revenue Office prior to 31 December. This will help ensure that the relevant exemption or concession is applied correctly and in time.

How is land tax calculated?

Land Tax is calculated by applying the relevant tax rate to the total taxable value of a person’s land holdings.  The total taxable value of a person’s land holdings is determined by adding the individual site values of each property (real property) owned.

Site value is simply the value of the land only. An accredited property valuer does not consider nor include the value of any capital improvements (eg buildings, structures, fences etc) when calculating a properties site value.

Once the site value for each property has been determined and the total taxable value of a person’s holdings established, the relevant tax rate is applied and the total Land Tax amount generated.  Your Land Tax will therefore differ depending on the total taxable value of your land holdings.  A breakdown of the current Land Tax rates are as follows:

Total taxable value of holdingsLand Tax payable
< $250,000.00Nil
$250,000.00 to < $600,000.00$275 plus 0.2% of any amount over $250,000.00
$600,000.00 to < $1,000,000.00$975 plus 0.5% of any amount over $600,000.00
$1,000,000.00 to < $1,800,000.00$2975 plus 0.8% of any amount over $1,000,000.00
$1,800,000.00 to < $3,000,000.00$9375 plus 1.3% of any amount over $1,800,000.00
$3,000,000.00 and over$24,975 plus 2.25% of any amount over $3,000,000.00

What if there is an error on my Land Tax assessment notice?

It is somewhat common for errors to appear on your Land Tax Assessment notice.  Depending on the extent of the error, it may result in you paying too much or too little Land Tax.

Simple administrative errors such as misspelling a person’s name or address can be fixed quickly and easily by contacting the State Revenue Office.  In order to request a change, you must contact the State Revenue Office within 60 days of the date you receive your Land Tax Assessment Notice.

Complex errors on the other hand such as applying the incorrect Land Tax exemption need to be amended in accordance with the prescribed objection process.  If you believe that there should have been an exemption applied to your property and/or the incorrect exemption has been applied, you must lodge an objection with the State Revenue Office within 60 days from the date you received your Land Tax Assessment notice.

If you believe you have grounds to lodge an objection against your Land Tax Assessment notice, the Coulter Roache Property and Development Team can assist you.

What if I disagree with the site value of my property?

In addition to the above, it is also common for properties to be assessed for Land Tax based on incorrect site values.  The site value of each property owned will be listed on your Land Tax Assessment Notice. This is determined by the Valuer General of Victoria and is also used for calculating our municipal rates.

Objections to your properties site value need to be lodged with the State Revenue Office via the online portal by and no later than 60 days after you receive your Land Tax Assessment Notice.  Your objection is then referred to the Victorian Valuer General whom is the Government body responsible for determining your properties site value. The Valuer General (or its contracted valuer) then consider the objection and either re-value the property or provide a formal response.

The Valuer General is bound by the provisions of the Valuation of Land Act 1960 (Vic) and therefore objections to your properties site value need to contain certain information as prescribed by legislation.  The Valuer General often contracts its valuations out to independent, non-government valuing companies. This means that quite often the objection process as set out in the Valuation of Land Act 1960 (Vic) is not properly adhered to.

Primary Production Land

As mentioned above, certain primary production land (farming land) that is used substantially for the following purposes may be exempt from Land Tax:

(a) Cultivation for the purposes of selling produce;

(b) Maintaining animals or poultry for the purpose of selling them or their bodily produce;

(c) Keeping bees for the purpose of selling honey;

(d) Commercial fishing (this includes land where commercial fishing gear and/or the products of commercial fishing are stored); and

(e) Cultivation and preparation of plants for the sale of plants, seedlings, mushrooms or orchids.

The above activities will render certain land (dependent on its location) exempt from Land Tax where it can be proven that the primary production activity described above is the most significant or dominant use of the land. This means that there needs to be evidence of you making an income from the primary production activity, proving that it is not just a mere hobby or recreational pursuit. Accordingly, the Primary Production Exemption does not apply to hobby farms in most instances.

The Primary Production Exemption also applies to land that is being ‘prepared’ for primary production.  According to State Revenue Office Revenue Ruling LTA.006, activities that are considered to be ‘preparatory’ are as follows:

(a) clearing land

(b) building fences

(c) constructing fire breaks

(d) planting wind breakers,

(e) removing weeds and vermin

(f) ploughing

(g) fertilizing

(h) applying topsoil enhancement

(i) creating dams and irrigation for water supply; and

(j) restoring soil spoilt by salt water encroachment.

For the exemption to apply to land which is being prepared for primary production, the actual primary production activity (as listed at section 64(1) of the Land Tax Act 2005 (Vic)) must commence within 12 months of the preparatory activities commencing.  In certain circumstances, this time period can be extended, however extensions are granted entirely at the discretion of the Commissioner for State Revenue.

Trusts

Different Land Tax rates and/or surcharges apply to land that is being held on trust for the benefit of another person or entity.  The rate of Land Tax payable will depend entirely on the type of Trust established.

It is important to note that it is the registered proprietor’s responsibility to notify the State Revenue Office of the way in which property is held/owned.  In Victoria, Trusts do not show on a certificate of title which means land is often incorrectly assessed for Land Tax.

If Land has been incorrectly assessed and such errors come to the attention of the State Revenue Office, there is a possibility that the State Revenue Office will re-assess your Land for up to 5 years preceding the error. This often results in significant Land Tax debts being issued. Therefore, it is imperative to ensure that your land is being assessed at the correct Land Tax Rate and/or surcharge, particularly where the land is being held on trust.

If you hold land on Trust for the benefit of another person or entity, it is prudent to ensure that you have a formal trust deed in place. This can then be provided to the State Revenue Office therefore notifying them and allowing the land to be assessed against the correct Land tax rate or surcharge.

Conclusion

Land Tax can be a complicated process and is often calculated incorrectly. This mainly occurs due to incorrect site values being used or a lack of information being provided to the State Revenue Office.

Coulter Roache is capable of providing clients with complex Land Tax advice and is more than happy to assist its clients with objecting to a Land Tax Assessment Notice or Municipal Rates Notice.

In addition to the above, our team can assist land owners in drafting and preparing formal trust deeds to properly document the way in which property is held.  We have significant experience in assisting land owners with the above mentioned issues occurring across a range of properties from farming land to residential and commercial properties.

Contact a member of our Property and Development team today if you would like to discuss your Land Tax Assessment Notice or Municipal Rates Notice.

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