Land Tax Surcharge - Do the changes impact you?

 

In July of 2015, the Victorian Government announced a number of changes to the stamp duty and land tax rules which targeted foreign purchasers and owners of Victorian land, but alarmingly could impact many resident landholders. Included in the changes were increased land tax rates for foreign owners of Victorian land, now known as the absentee owner surcharge.

 

Who is an Absentee Owner?


The concept of an ‘Absentee Owner’ was introduced as part of the above set of changes, and is defined to be any person or entity who falls into one of the following groups:

  • Absentee individual - an individual who is not a permanent resident of Australia and does not ordinarily reside in Australia.
  • Absentee company - a foreign company or an Australian incorporated company which is controlled directly or indirectly (through shareholding or voting power) by an absentee individual, absentee company or absentee trust.
  • Absentee trust – a trust which has at least one absentee beneficiary who is a unit holder in a unit trust or a specified beneficiary of a discretionary trust.

 

Beware: The SRO has confirmed that if a specified individual beneficiary of discretionary trust meets the definition of an absentee owner, then the discretionary trust itself will be treated as an absentee trust regardless of whether the trust has made, or intends to make, distributions to that particular beneficiary.


What are the consequences of being an Absentee Owner?


If you are an absentee owner you are required to pay the absentee owner surcharge. The surcharge was initially levied at 0.5% of the taxable value of Victorian land in addition to the general land tax and trust surcharge amounts that are ordinarily levied by the State Revenue Office (SRO). The rate of the absentee owner surcharge has increased to 1.5% effective 1 January 2017.

 

What you must do:


1)      Review your Victorian landholdings now in order to consider whether they might be subject to the absentee owner surcharge.

2)      All absentee owners must notify the SRO of their status before 15 January in each land tax year. Penalties may apply where this does not occur.

3)      Discretionary trusts which hold land should carefully examine their trust deeds to ascertain if a specified beneficiary is an absentee owner.  If so a variation of the deed may need to be considered.

 

Should you have any questions please contact Ramon Bernardi at Lombardi Partners on 03 9328 5300 or ramon@lombardipartners.com.au.

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