Are You Paying Too Much in Victorian Land Tax?
If you own property in Victoria, there’s a chance you might be paying more land tax than you need to. Victorian land tax rules have changed recently, and many property owners aren’t aware of two common mistakes that could be costing them extra dollars.
In this article, we’ll walk you through these mistakes and show you how to make sure you’re only paying the tax you owe — no more, no less.
How Does Land Tax Work?
First things first, let’s break down how land tax works.
- Land tax is charged based on the value of all the property you own. The more property you have, the more tax you pay.
- There’s a tax-free threshold, so if your property’s value is below that, you won’t owe any tax.
- The amount you pay also depends on whether you own the property in your own name, in a company or through a trust.
- Property that is owned in your own name and is your main residence, is exempt from land tax.
- Property owned in a trust is subject to an additional surcharge.
- Note, absentee ownership, group assessments and vacant residential land tax are a conversation for another time.
That’s the basic idea. We’ve included a table to show you how the rates get applied. Now let’s look at the two common mistakes property owners make…
Mistake 1 – Your Property is Listed Under the Wrong Name
Land tax is charged based on your total property holdings, so it’s crucial that your properties are listed under the correct ownership details with the State Revenue Office. One common problem is when a property held in trust is mistakenly taxed under the individual or company’s name, not under the trust’s name. This means the property gets taxed under the individual or company’s name, instead of being taxed separately under the trust. And this can lead to you paying more tax than necessary, which we want to avoid!
How to Fix It:
- Check your assessment notice (example below). It should clearly state if a property is owned by a trustee.
- Review the statement of lands to make sure all properties are listed under the correct entity. If something looks wrong, contact the State Revenue Office to correct it.
Mistake 2 – The Trust Surcharge is Applied When It Shouldn’t Be
Another costly mistake is when the trust surcharge is applied to a type of trust that shouldn’t be taxed at that higher rate. Certain trusts, known as excluded trusts, qualify for a lower tax rate. These include:
- Charitable trusts
- Public unit trusts
- Complying superannuation funds (like your self-managed super fund)
For example, if you own property through a super fund, you should be paying the lower general rate, not the higher trust surcharge. This mistake happens more often than you’d think!
How to Fix It:
- If you suspect your trust is being taxed at the wrong rate, reach out to the State Revenue Office or get advice from us.
Hang on, why would I own property in a trust if it means paying extra land tax?
- Trusts offer two great benefits, flexibility and asset protection. A trust helps protect your property if someone takes legal action against you personally. It also gives you more options when it comes to managing profits, often reducing the amount of tax you pay overall. Though it depends on your situation, generally these benefits outweigh the extra land tax.
What to do if you’ve been overcharged?
If you find that your land tax assessment has mistakes — whether the property is listed under the wrong name or you’re being charged the wrong rate — it’s important to take action. Contact the State Revenue Office for advice or let us step in to review your assessment and help resolve the issue.
Final Thoughts: Don’t Let Simple Mistakes Cost You
Land tax can be confusing, and it’s easy to get caught paying too much because of a simple mistake. But by keeping an eye on how your property is taxed and making sure it’s correctly listed, you can avoid overpaying and keep your tax bill in check.
If you’re not sure about your current land tax assessment, we’re here to help — let’s make sure you’re only paying what you owe.
Have a question or comment?
If you have any questions or comments relating to this article (or any other accounting matter) please get in touch with us at [email protected] and we’ll be happy to assist you.