A New Vacant Residential Land Tax Is Now In Force
Will You Be Affected?
From 1 May 2017, the Victorian Government has introduced a tax on vacant residential properties in the inner city and some suburban areas of Melbourne that could require you to pay thousands of dollars to the State Government.
This tax, if it applies to your property, will be 1% of the Capital Improved Value of your property (the value of your property as listed on your council rates notice) and must be paid to the State Revenue Office (SRO) annually.
For example, if you own a $500,000 property, you will be taxed $5,000.
The SRO requires you to notify them by 15 January 2018 if your property meets the definition of a vacant residential property for the 2017 calendar year – your property is vacant for 6 months or more in a calendar year.
You must notify the State Revenue Office (SRO) by 15 January 2018 even if you think your property is eligible for an exemption.
As the law was only introduced in May 2017, the SRO is applying to the presumption that your property was occupied between 1 January 2017 and 30 April 2017.
From 2018, to avoid this tax, it will be necessary that your property is not vacant for more than 6 months.
Why did the Government introduce this tax?
The vacant residential land tax has been put in place to encourage landowners to make residential properties available for acquisition or rent so that Melbourne’s housing stock is utilised as efficiently as possible.
Is my property a vacant residential property?
This tax applies to property capable of being used solely or primarily for residential purposes.
This also includes land that is undergoing construction or renovation, where it was capable of being used for residential purposes before the works and will be capable of residential use after the works.
Residential land does not include vacant land, commercial premises, retirement villages or aged care facilities.
Which properties does the tax apply too?
The tax also only applies to certain councils located in inner suburban Melbourne. These councils are:
Properties located outside of these locations will not have to pay this tax. However, the tax may extend to other localities at a later date.
What happens if I do own a vacant property in these areas?
If you own a vacant residential property within one of these councils, you must notify the SRO that your property was vacant.
The notification can be made through the online form and several exceptions also apply. You can notify the SRO of your vacant property and/or claim an exemption, here.
However, if you are relying on one of these exemptions you must still complete the form and claim the exemption via the online portal.
These exemptions are:
Change of ownership of property (exempt in the calendar year of change of ownership);
Holiday homes (owned by those with a principal place of residence in Australia);
A city unit for work purposes;
Properties in deceased estates and homes subject to legitimate temporary absence (e.g. medical care, overseas appointments);
The property is used to travel to a workplace (within one of the 16 council areas) for work purposes for at least 144 days in a calendar year but you have a permanent residence somewhere else in Australia; or
The property is occupied by the owner for at least four weeks in the calendar year (only available to one holiday home, for the owner, who has a different permanent residence in Australia, and it must be a genuine holiday home).
If one of these exemptions applies to your property, you must notify the SRO that your property is eligible for an exemption.
Does this tax apply to properties being constructed and renovated?
Properties that are being constructed and renovated will not be considered vacant for up to two years from when the construction or renovation commences. The two-year period starts from the date the building permit is issued, which is, therefore, the date construction or renovation commences. Under certain circumstances, the Commissioner may extend this period. An acceptable reason would usually consist of a series of events which is beyond the landowner’s control which has therefore delayed the start or finish of the renovations for the property to be occupied.
What happens if I do not notify the SRO
Owners of vacant residential properties must notify the State Revenue Office by 15 January each year. Like all taxation matters, failure to notify the SRO of your vacant property, even if you have an exemption is deemed a notification default and may be subject to a penalty tax under the Taxation Administration Act 1997.
For legal advice on the new tax or any matters related to your Properties, contact Argent Law to make an appointment with one of our experienced practitioners.