What Do The New Victorian Land Tax Thresholds Mean For You?

Victoria’s decision to lower the land tax threshold to $50,000 in 2024 is a significant change that could affect many businesses. For properties held in trust, the threshold remains at $25,000. If your business owns property in Victoria and its total value meets or exceeds this amount by December 31st, you’ll need to pay land tax.

If your business has never had to pay land tax before, this new rule could mean a new financial obligation. It’s a good idea to check the value of your properties now and prepare for potential tax implications under the updated regulations.

How does land tax work and who needs to pay it?

Land tax is a yearly fee that you pay to the government for owning land. It's based on how much your land is worth without any buildings on it. If you own more than one piece of land, the tax is based on the total value of all of them. How much you owe can change depending on if you own the land by yourself, with someone else, or through a trust.

Usually, you don't have to pay land tax on your home. But if you own property for investment or business purposes, or if you're from another country, you might owe extra taxes. It's important to understand these rules to make sure you're paying the correct amount of tax.

When can you claim land tax as a deduction?

Whether you can claim land tax as a deduction on your tax return depends on when you owe the tax. This is determined by the specific rules of the state where your property is located.

Timing is everything

It's important to understand that you owe land tax based on how you used the property throughout the year, not when you receive the tax bill. If you get a land tax bill late, you generally can't claim it as a deduction that year. Instead, you'll claim it in the year you owed the tax.

Selling or moving in?

If you sell your property or move into it during the year you get a land tax bill, you don't need to complicate things by trying to split up the deduction. The Australian Taxation Office (ATO) generally assumes you owed the tax for the whole year.

What about refunds?

If you sell your property and get a land tax refund, you'll need to report that refund as rental income on your tax return.

How does land tax differ across Australian states and territories?

While Victoria’s changes are significant, it’s also important to understand how land tax regulations differ across Australia, as these can vary widely depending on the state or territory.

Here’s a quick overview:

• Western Australia: Land tax applies to properties valued over $300,000, excluding your principal residence.
• New South Wales: For 2024, the general land tax threshold is $1,075,000, with a premium threshold at $6,571,000. Land values are assessed as of July 1st each year.
• Australian Capital Territory: Land tax is levied on properties that are not your primary residence, including vacant land and rental properties.
• Tasmania: Land tax is charged on properties classified as general land, with various exemptions depending on the property’s use.
• Queensland: Land tax applies to freehold land valued over $350,000 for companies and trusts, and over $600,000 for individuals.
• South Australia: The tax is assessed based on property ownership as of June 30th, with special rules for trust-held properties.
• Northern Territory: There is no land tax currently imposed.

Each state has its own rules and exemptions, so it's essential to be aware of the specific regulations that apply to your properties.