Vacant residential land tax and Absentee owner surcharge have been introduced by the Victorian Government that may impact overseas investors involved in the Australian residential property market.
We are observing many foreign property investors are unaware of these taxes and failure of the notification may result in penalty tax.
Property owners need to notify the State Revenue Office (SRO) voluntarily if vacant residential land tax and absentee owner surcharge applied before the 15th of January 2022.
Vacant residential land tax (VRLT)
Vacant residential land tax affects property owners who own a home in inner and middle Melbourne that has remained unoccupied for more than six months of the calendar year.
The Vacant Residential Property Tax will be a 1 per cent tax on the capital improved value (CIV) of the taxable property.
The CIV of a property is the value of land and buildings and any other capital improvements made to the property as determined as part of the council valuation process. It is displayed on the council rate notice for the property. For example, if the taxable property has a capital improved value of $500,000, the applicable tax will be $5,000.
This tax was waived in 2021 as part of Victorian Government coronavirus relief measures, and will re-commence in 2022.
Some vacant homes will be eligible for an exemption. These include properties used as holiday homes or city work units, ownership of the property changed during that year. Voluntary notification to the SRO is required even the property is exempt.
Absentee owner surcharge (AOS)
All property in Victoria is subject to land tax, unless an exemption applies or the property is below the threshold ($300,000 from the 2022 land tax year). An assessment is made on the value of all your taxable property at midnight on 31 December each year to determine the amount of land tax payable for the following year.
From the 2020 land tax year, an absentee owner surcharge of 2% applies to Victorian land owned by an absentee owner (a natural person absentee, absentee corporation, or absentee trust).
An absentee corporation and an absentee trust may be eligible for an exemption from the absentee owner surcharge. Discretionary relief may be sought in certain circumstances including where land is acquired for significant property development to add to housing supply.