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An absentee owner surcharge applies to Victorian land owned by an absentee owner. This surcharge is 1.5 per cent from 1 January 2017 (previously 0.5 per cent).

If you own land with others, you are a joint owner. We assess joint owners for land tax in two stages:

Stage 1 - Joint ownership assessment
We assess all of the joint owners together, on all of their jointly owned land as though they were one person.

Stage 2 - Individual assessment
We assess each owner individually on all the taxable lands you own (in any capacity), including your interest in any jointly owned land.

If you are assessed for tax on the jointly owned land under a joint ownership assessment, we will apply a deduction to your individual assessment. Your deduction is the lesser of either:

  • Your share of the tax in the joint ownership assessment (Deduction 1), or
  • The amount of tax calculated in your individual assessment for your share in the jointly owned land (Deduction 2)

Land tax and joint owners

Absentee owners and joint owner assessments

How the absentee owner surcharge applies to joint owners depends on how many of the joint owners are absentee owners.

If all the joint owners are absentee owners, the surcharge applies to the joint ownership and to each individual owner.

If only some of the joint owners are absentee owners, the surcharge will not apply to the joint ownership assessment. The surcharge will only apply to the individual absentee owner. A joint owner who is not an absentee owner will not be subject to the surcharge.

Below is an illustration of how the absentee owner surcharge applies when:

Example A: All owners are absentee owners

At midnight on 31 December 2016 (the preceding tax year), John and Indira each own 50 per cent of Property A, an investment property with a taxable value of $280,000.

Indira also owns one other property in her own name, Property B, an investment property with a taxable value of $200,000.

Both John and Indira are absentee owners. 

John and Indira, as the joint owners of Property A, will be assessed together in the joint ownership assessment.

Indira will be assessed separately as an owner of 50 per cent of Property A and other land (Property B).

Joint ownership assessment 

John and Indira’s joint ownership liability is determined using the total taxable value of their non-exempt land and applying the appropriate rate of land tax.

The taxable value of the jointly owned land (Property A) is $280,000.

The general absentee owner land tax rate for land holdings valued between $250,000 and less than $600,000 is $4025 + 1.7% of the amount greater than $250,000. 

Accordingly, the land tax payable is $4535, being $4025 + (($280,000 - $250,000) x 1.7%).

John and Indira both share liability for this amount.

Individual assessment of John

As John does not own any other taxable lands, other than Property A, the deduction is equal to his individual tax liability and so no tax is payable.

As such, we do not issue him with an individual assessment and he only has to pay the joint ownership assessment.

Individual assessment of Indira

As Indira owns other property, she receives an individual assessment which includes all of the taxable land she owns, including the jointly owned land.

There are three steps to calculating Indira’s land tax liability:

  1. Calculate Indira’s liability on her total land holdings,
  2. Calculate Indira’s joint ownership deduction, and
  3. Calculate Indira’s tax individual liability by applying the deduction

Step 1: Calculating Indira’s tax liability before joint ownership deduction

Calculate the total taxable value of Indira’s land holdings

Indira’s individual land holding, being Property B is valued at $200,000. 

The value of Indira’s joint ownership land holdings (i.e. 50 per cent of Property A) is $140,000, being 50 per cent of $280,000.

Accordingly, the total value of Indira’s land holdings is $340,000 ($200,000 + $140,000).

Calculate the tax payable on Indira’s total landholdings

The general absentee owner surcharge land tax rate for land holdings valued between $250,000 and less than $600,000 is $4025 + 1.7% of the amount greater than $250,000. 

The land tax payable by Indira before the joint ownership deduction is $5,555, being $4025+ (($340,000 - $250,000) x 1.7%).

Step 2: Calculating the joint ownership deduction

Indira is entitled to a joint ownership deduction in her individual assessment. The deduction is the lesser of:

  • 50% (proportion (%) of Indira’s share in the jointly owned land) x $4535 (total amount of land tax assessed on the joint ownership assessment) = $2267.50, or
  • $140,000 (the value of Indira’s share in the jointly owned land) divided by $340,000 (Indira’s total land holdings) x $5555 (tax on Indira's total land holdings)) = $2287.35

Therefore, Indira is entitled to a joint ownership deduction of $2267.50.

Step 3: Calculating Indira’s tax liability after deduction

By subtracting the lesser amount of $2267.50 from the tax on Indira’s total land holdings ($5555), we find that the land tax payable by Indira as an individual is $3287.50 (i.e. $5555 - $2267.50).

Indira is still also liable to pay the joint ownership assessment.

This diagram illustrates the example above

Example B: Some owners are absentee owners

At midnight on 31 December 2016 (the preceding tax year), Minh and Therese each own 50 per cent of Property A, an investment property with a taxable value of $280,000.

Therese also owns one other property in her own name, Property B, an investment property with a taxable value of $200,000.

Only Therese is an absentee owners. 

Minh and Therese as the joint owners of Property A, will be assessed together in the joint ownership assessment.

Therese will be assessed separately as both an owner of Property A and owner of other land (Property B).

Joint ownership assessment 

Minh and Therese’s joint ownership liability is determined using the total value of their taxable land and applying the appropriate rate of land tax.

The taxable value of the jointly owned land (Property A) is $280,000.

As only Therese is an absentee owner, general rates of land tax will apply to the joint ownership assessment. The general land tax rate for land holdings valued between $250,000 and less than $600,000 is $275 + 0.2% of the amount greater than $250,000. 

Accordingly, the land tax payable is $335, being $275 + (($280,000 - $250,000) x 0.2%).

Minh and Therese both share liability for this amount.

Individual assessment of Minh

As Minh does not own any other taxable lands, other than Property A, the deduction is equal to his individual tax liability and so no tax is payable.

As such, we do not issue him with an individual assessment and he only has to pay the joint ownership assessment.

Individual assessment of Therese

As Therese owns other property, she receives an individual assessment which includes all of the taxable land she owns, including the jointly owned land.

There are three steps to calculating Indira’s land tax liability:

  1. Calculate Therese’s liability on her total land holdings,
  2. Calculate Therese's joint ownership deduction, and
  3. Calculate Therese's tax individual liability by applying the deduction

Step 1: Calculating Therese’s tax liability before joint ownership deduction

Calculate the total taxable value of Therese’s land holdings

Therese’s individual land holding, being Property B is valued at $200,000.

The value of Therese’s joint ownership land holdings in Property A is $140,000, being 50 per cent of $280,000.

Accordingly, the total value of Therese’s land holdings is $340,000 ($200,000 + $140,000).

Calculate the tax payable on Therese’s total landholdings

The 2017 general absentee owner surcharge land tax rate for land holdings valued between $250,000 and less than $600,000 is $4025 + 1.7% of the amount greater than $250,000. 

The land tax payable by Therese before the joint ownership deduction is $5555, being $4025+ (($340,000 - $250,000) x 1.7%).

Step 2: Calculating the joint ownership deduction

Therese is entitled to a joint ownership deduction in her individual assessment. The deduction is the lesser of:

  • 50% (proportion (%) of Therese’s share in the jointly owned land) x $335 (total amount of land tax assessed on the joint ownership assessment) = $167.50, or
  • $140,000 (the value of Therese’s share in the jointly owned land) divided by $340,000 (Therese’s total land holdings) x $5555 (tax on Therese's total land holdings)) = $2287.35

Therefore, Therese is entitled to a joint ownership deduction of $167.50

Step 3: Calculating Therese’s tax liability after deduction

By subtracting the lesser amount of $167.50 from the tax on Therese’s total land holdings ($5555), we find that the land tax payable by Therese as an individual is $5387.50 (i.e. $5555 - $167.50).

Therese is still also liable to pay the joint ownership assessment.

This diagram illustrates the above example