If you are an absentee owner, an absentee owner surcharge applies to taxable Victorian land you own. This surcharge is 1.5 per cent from 1 January 2017 (previously 0.5 per cent). The surcharge will be 2 per cent from 1 January 2020.
An absentee owner includes an absentee corporation. The surcharge is an additional amount that you pay as an absentee corporation. It applies over the land tax you pay, unless you have been granted a controlling interest exemption.
If you are an absentee corporation, you should tell us as soon as possible via our Absentee Owner Notification Portal. This is important. Penalties may apply if you don’t tell us.
An absentee corporation is a corporation:
- incorporated outside Australia, or
- in which an absentee person(s) has a controlling interest.
An absentee person has a controlling interest where they either alone, or acting together with another absentee person:
- Holds more than 50 per cent of the shares in the absentee corporation.
- Can control the composition of the board of the corporation.
- Can cast more than 50 per cent of the maximum number of votes at the corporation’s general meeting.
The absentee person with a controlling interest can be an absentee corporation, a trustee of an absentee trust or an absentee individual.
In deciding whether an absentee person has, or absentee persons acting together have, a controlling interest in a corporation, you must look at all absentee persons who are able to exercise a controlling interest over the corporation.
XYZ Pty Ltd is a company that is incorporated in Australia and owns taxable land in Victoria.
XYZ Pty Ltd has two shareholders, A Pty Ltd which holds 45 per cent of the shares and B Pty Ltd which holds 55 per cent of the shares. Both A Pty Ltd and B Pty Ltd are incorporated in Australia.
B Pty Ltd has three shareholders, Poli who holds 30 per cent, Elena who holds 30 per cent and Jason who holds 40 per cent. Poli and Elena are both absentee individuals.
Poli and Elena together have a controlling interest in B Pty Ltd as together they have 60 per cent of shares. Therefore B Pty Ltd is an absentee corporation. B Pty Ltd, in turn, has a controlling interest in XYZ Pty Ltd as it holds 55 per cent of the shares. Therefore, XYZ Pty Ltd is also an absentee corporation.
The diagram below illustrates this example.
Absentee corporations may be part of a land tax group. Where all members of a land tax group are absentee corporations, the absentee owner surcharge will apply to all land held by the members of the land tax group. Where only some members of a land tax group are absentee corporations, the absentee owner surcharge only applies on the total taxable value of land held by the absentee corporations.
Company A, Company B and Company C are part of a land tax group. Company A is an absentee corporation. The three companies own the following taxable Victorian land as at 31 December 2017:
- Company A owns Victorian land with a taxable value of $1,000,000.
- Company B owns Victorian land with a taxable value of $500,000.
- Company C owns Victorian land with a taxable value of $500,000.
The total taxable value of land held by the land tax group is $2,000,000.
The amount of land tax payable by the land tax group is calculated as follows:
- Step 1: determine the amount of land tax payable at the general rate of tax on the total taxable value of land held by the land tax group (i.e. $2,000,000).
The general rate of tax for land with a taxable value between $1,800,000 and $3,000,000 is $9375 plus 1.3 per cent of the amount greater than $1,800,000.
The tax payable is $9375 + (($2,000,000 - $1,800,000) x 1.3 per cent)) = $11,975.
- Step 2: the taxable value of the land owned by the absentee corporation x 1.5 per cent (i.e. $1,000,000 x 1.5 per cent = $15,000).
- Step 3: Total tax assessed is $11,975 + $15,000 = $26,975.
As all members of a land tax group are jointly liable for land tax owed by the group, we are able to recover land tax from any member of the group, including the land tax assessed at the surcharge rate.
If you are an absentee owner at 31 December, you must tell us before 15 January of the following year using our Absentee Owner Notification Portal.
There are two ways you can notify us:
- A person representing the land tax group (using the land tax group’s customer number) can notify us on behalf of each member of the group.
- Each member of the land tax group can notify us separately.
Once you have notified us that you are an absentee owner, your land tax assessments will include the absentee owner surcharge. Further, we will assume that your absentee owner status is current until you tell us otherwise.
Failing to tell us you are an absentee owner is a notification default under the Taxation Administration Act 1997. When this happens, you will be liable for penalty tax on the surcharge amount assessed, in accordance with our revenue ruling on penalty tax and interest. This may be penalty tax of:
- 5 per cent if you voluntarily tell us that you are an absentee owner before we start investigating you.
- 20 per cent if you tell us you are an absentee owner after we start an investigation.
- Up to 90 per cent if we believe that you intentionally disregarded the law and hindered our investigation.
Changes to your absentee owner status
Notify us of any change in your absentee owner status by updating your details through our Absentee Owner Notification Portal.
Controlling interest exemption
An absentee person who holds a controlling interest in an absentee corporation may, in some circumstances, be eligible for an exemption. The effect of the exemption is that the absentee person, who holds a controlling interest in the absentee corporation, is taken to not hold that controlling interest. The result is the corporation that owns the land will not be considered an absentee corporation, and therefore will be exempt from the absentee owner surcharge.
The exemption is only available to an absentee person who holds a controlling interest in a corporation that is incorporated in Australia and owns land in its own right.
The exemption is intended to apply to those corporations which conduct a commercial operation in Australia and whose commercial activities make a strong and positive contribution to the Victorian economy and community by engaging local labour and using local materials and services through an Australian-based entity.
The Treasurer's guidelines, published in the Government Gazette, outline the basis on which exemption decisions are made. Before you apply for an exemption, you should refer to the relevant guidelines to determine whether you are eligible for the exemption:
- For exemption applications relating to 2016 and 2017 land tax years, refer to the Treasurer's guidelines issued on 11 August 2015.
- For exemption applications relating to the 2018 land tax year, refer to the Treasurer's guidelines issued on 5 January 2018, which were issued after a scheduled review. These guidelines include the criteria for absentee trusts.
- For exemption applications relating to the 2019 land tax year onwards, refer to the Treasurer's guidelines issued on 1 October 2018. These guidelines were issued to include examples of how build-to-rent developments may qualify for the exemption. The exemption will cease to apply when the build-to-rent development is completed, as the absentee corporation or the trustee of the absentee trust will then be considered a passive investor or landlord.