Navigating the 2024 Victorian Land Tax Changes.
Land tax is an annual tax based on the total taxable value of all the land you own in Victoria, excluding exempt land such as your home.
Associate Partner, Matt Lazzaro has prepared a breakdown of these changes for our clients – we hope this provides more insight into how land owners will be impacted.
The Victorian Government has announced significant updates to the land tax rates effective from the 2024 land tax year, impacting a wide spectrum of property owners and trusts. These changes are pivotal for planning and compliance, especially in the context of Victoria’s strategy to address fiscal responsibilities, including the repayment of COVID-19 related debts. Here we will look at the specifics of the new land tax rates and how they might affect your property investments.
Victorian Land Tax Rates from 2024 to 2033
General Land Tax Rates
The land tax rates for general landowners have been adjusted as follows:
| Under $50,000 | No tax |
| $50,000 to under $100,000 | $500 |
| $100,000 to under $300,000 | $975 |
| $300,000 to under $600,000 | $1,350 plus 0.3% of the amount over $300,000 |
| $600,000 to under $1,000,000 | $2,250 plus 0.6% of the amount over $600,000 |
| $1,000,000 to under $1,800,000 | $4,650 plus 0.9% of the amount over $1,000,000 |
| $1,800,000 to under $3,00,000 | $11,850 plus 1.65% of the amount over $1,800,000 |
| $3,000,000 and over | $31,650 plus 2.65% of the amount over $3,000,000 |
Trust Surcharge Rates
For properties held within trusts, the rates are slightly different to reflect the additional surcharge applied to trusts:
| Under $25,000 | No tax |
| $25,000 to under $50,000 | $82 plus 0.375% of the amount over $25,000 |
| $50,000 to under $100,000 | $676 plus 0.375% of the amount over $50,000 |
| $100,000 to under $250,000 | $1,338 plus 0.375% of the amount over $100,000 |
| $250,000 to under $600,000 | $1,901 plus 0.675% of the amount over $250,000 |
| $600,000 to under $1,000,000 | $4,263 plus 0.975% of the amount over $600,000 |
| $1,000,000 to under $1,800,000 | $8,163 plus 1.275% of the amount over $1,000,000 |
| $1,800,000 and under $3,000,000 | $18,363 plus 1.1072% of the amount over $1,800,000 |
| $3,000,000 and over | $31,650 plus 2.65% of the amount over $3,000,000 |
Absentee Owner Surcharge Rates
Absentee owners will face higher rates to discourage underutilized property and encourage active property management:
- Under $50,000: No tax
- For amounts over $50,000, the surcharge significantly increases, culminating in a rate of 6.65% for properties valued over $3,000,000.
Trust Surcharge Rates with Absentee Owner Surcharge
Trusts with absentee owners are subject to the most significant increases, reflecting both trust and absentee surcharges:
- Similar to general rates for absentee owners, the combined surcharge rates for trusts start at a higher threshold and peak at 6.65% for properties over $3,000,000.
Calculating Your Land Tax
To estimate your land tax under the new regime, it’s advisable to use the Victorian Government’s land tax calculator, which incorporates the latest rates and thresholds. This tool can provide a more precise calculation based on your specific property values and ownership structures. You can find the calculator here: www.sro.vic.gov.au/calculators/land-tax-calculator
Implications for Property Owners
These changes have broad implications for property investment strategies in Victoria:
- Increased Costs for High-Value Properties and Trusts: Owners of high-value properties and those holding property in trusts will face increased tax liabilities, which could affect the net returns on property investments.
- Encouraging Active Property Use: The introduction of higher absentee owner surcharges is designed to discourage leaving properties vacant, aiming to improve housing availability.
- Strategic Property Planning: Property owners may need to reassess their holding structures and consider the long-term implications of these tax changes on their investment portfolios.
To help illustrate how the new Victorian land tax rates for 2024 will affect different property owners, here are a couple of examples. These scenarios will provide a clearer understanding of the tax implications under the updated regime.
Example 1: General Land Owner
Scenario: Jane owns a residential property in Victoria with a total taxable value of $750,000.
Calculation:
- The first $600,000 incurs a tax of $2,250.
- The remaining $150,000 is taxed at 0.6%, amounting to $900 ($150,000 * 0.6%).
- Jane’s total land tax would be $3,150 ($2,250 + $900).
Example 2: Property Held in a Trust
Scenario: An investment trust owns a commercial property valued at $1,200,000.
Calculation:
- The first $1,000,000 incurs a tax of $8,163.
- The remaining $200,000 is taxed at 1.275%, amounting to $2,550 ($200,000 * 1.275%).
- The total land tax for the trust would be $10,713 ($8,163 + $2,550).
Conclusion
The 2024 Victorian land tax adjustments signify a substantial shift in the property taxation landscape. By understanding these changes, property owners and investors can better navigate the evolving fiscal environment, ensuring they make informed decisions about their property investments in Victoria.
For more information, or to speak to a professional, contact your local Highview office to arrange some tailored advice.
Article written by Matt Lazzaro, Associate Partner & CPA
Highview Accounting & Financial – Cranbourne