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If you are an absentee owner, an absentee owner surcharge applies to the taxable Victorian land you own. This surcharge is 1.5 per cent from 1 January 2017 (previously 0.5 per cent).

The surcharge is an additional amount and applies over the land tax you pay at general and trust surcharge rates

If you are a trustee of an absentee fixed trust that owns taxable land, you should tell us as soon as possible via our Absentee Owner Notification Portal. This is important because penalties may apply if you don’t tell us.

A fixed trust is an absentee trust if any absentee person has a beneficial interest in the land subject to the fixed trust. The absentee beneficiary of a fixed trust can be an absentee corporation, a trustee of an absentee trust or an absentee individual.

Land tax for absentee fixed trusts

The amount of land tax payable by a trustee of an absentee fixed trust depends on whether the trustee has notified us of the beneficiaries of the trust or has nominated a principal place of residence .

Beneficiaries not notified

Where no notification is made, the trustee of an absentee fixed trust will be assessed for land tax at the:

  • trust surcharge rates on the trust land, plus the
  • absentee owner surcharge rate on the trust land which is held for the absentee beneficiaries.

Land tax trust surcharge

Example 1

ABC Pty Ltd is trustee of the ABC Fixed Trust, which owns taxable land in Victoria. ABC Pty Ltd has not made a notification of the beneficiaries of the trust. Therefore, it will be liable to the trust surcharge rate of land tax.

The beneficiaries of the ABC Fixed Trust are Bill and Ben, who each hold an equal beneficial interest in the trust land. Bill is an absentee person and therefore the ABC Fixed Trust is an absentee trust. Neither Bill nor Ben owns other land.

ABC Pty Ltd’s 2019 land tax liability

In 2018, the taxable value of the land held under the ABC Fixed Trust is $1 million and the absentee owner surcharge rate is 1.5 per cent. The land tax payable by ABC Pty Ltd is assessed as follows.

  • Step 1: Land tax is assessed on the trust land at the trust surcharge rate. The trust surcharge rate for land with a taxable value of $1 million is $6438.
  • Step 2: The taxable value of the land that is held for the absentee beneficiary (Bill) is multiplied by the 2018 absentee owner surcharge of 1.5 per cent. As 50 per cent of the trust land is held for Bill, the taxable value held for Bill is 50 percent of $1 million = $500,000. The absentee owner surcharge assessed is $500,000 x 1.5 per cent = $7500.

The total land tax assessed for ABC Pty Ltd on the trust land is $6438 + $7500 = $13,938.

Beneficiaries notified

Where a notification has been made, the trustee of an absentee fixed trust will be assessed for land tax on the trust land at the:

  • general land tax rate on the trust land, plus the
  • absentee owner surcharge rate on the trust land which is held for the absentee beneficiaries.

Beneficiaries which are absentee owners will pay land tax based on the absentee owner surcharge rates, while beneficiaries who are not absentee owners will pay land tax based on the general rates. The beneficiaries will be entitled to a deduction for the tax that has been paid by the trust.

Example 2

This example uses the same details as the example above, except that ABC Pty Ltd has made a notification of the beneficiaries of the trust. Therefore, Bill and Ben are each deemed to be the owner of the trust land (in addition to the trustee) for land tax purposes, in proportion to their beneficial interest in the trust land. That is, Bill and Ben are each deemed to be the owner of 50 per cent of the trust land.

ABC Pty Ltd’s tax liability

The land tax assessed for ABC Pty Ltd is calculated as follows:

  • Step 1: Land tax is assessed on the trust land at the general rate of land tax. Land tax (at general rates) for land with a taxable value of $1 million is $2975.
  • Step 2: The taxable value of the land that is deemed to be owned by the absentee beneficiary (Bill) is multiplied by the absentee owner surcharge of 1.5 per cent. As 50 per cent of the trust land is deemed to be owned by Bill, the taxable value owned by him is $500,000. The absentee owner surcharge assessed is $500,000 x 1.5 per cent = $7500.

The total land tax assessed for ABC Pty Ltd on the trust land is $2975 + $7500 = $10,475.

Bill’s land tax liability

The land tax assessed on Bill (as deemed owner and absentee beneficiary) is calculated as follows:

  • Step 1: Land tax is assessed on the trust land deemed to be owned by the absentee beneficiary at the general absentee owner rate of land tax. The general absentee owner rate for land with a taxable value of between $250,000 and $600,000 is $4025 plus 1.7 per cent of the amount over $250,000. The tax assessed is $4025 + (($500,000 - $250,000) x 1.7 per cent)) = $8275.
  • Step 2: A deduction is applied to avoid double taxation, being the lesser of:
  1. Bill’s share of the trust land multiplied by the tax assessed on the trustee (excluding the absentee surcharge) i.e. 50 per cent x $2975 = $1487.50 plus the taxable value of the trust land deemed to be owned by Bill multiplied by 1.5 per cent (i.e. $500,000 x 1.5 per cent = $7500). $1487.50 + $7500 = $8987.50, or
  2. Taxable value of the trust land deemed to be owned by Bill divided by the taxable value of all land owned by Bill multiplied by the tax assessed for Bill (i.e. $500,000 ÷ $500,000 x $8275 = $8275).

The lesser of the two calculations is $8275.

No tax is payable by Bill after applying the deduction (i.e. tax assessed $8275 less deduction $8275 = $0).

Ben’s land tax liability

The land tax assessed on Ben (as deemed owner) is calculated as follows:

  • Step 1: Land tax is assessed on the trust land deemed to be owned by the beneficiary at the general rate of land tax. The general rate for land with a taxable value of between $250,000 and $600,000 is $275 plus 0.2 per cent of the amount over $250,000. The tax assessed is $275 + (($500,000 - $250,000) x 0.2 per cent)) = $775.
  • Step 2: A deduction is applied to avoid double taxation, being the lesser of:
  1. Ben’s share of the trust land multiplied by the tax assessed on the trustee (excluding the absentee owner surcharge) (i.e. 50 per cent x $2975 = $1487.50), or
  2. Taxable value of the trust land deemed to be owned by Bill divided by the taxable value of all land owned by Ben multiplied by the tax assessed for Bill (i.e. $500,000 ÷ $500,000 x $775 = $775).

The lesser of the two calculations is $775.

No tax is payable by Ben after applying the deduction (i.e. tax assessed: $775 less deduction $775 = $0).

Example 3

Delta Pty Ltd is trustee of the Delta Trust, which is a fixed trust. The beneficiaries are Polly, Molly, Dolly and Holly who each hold an equal (25 per cent) beneficial interest in the trust land. Polly and Holly are absentee individuals.

Delta Pty Ltd must notify us that the Delta Trust is an absentee trust and that the percentage of the taxable value of the trust land held by absentee persons is 50 per cent.

Tell us if you’re an absentee owner

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

You will also need to provide a percentage of the taxable value of the trust land that is held by the absentee beneficiaries. This is calculated as a proportion of the total taxable value of land held for the absentee beneficiaries as a proportion of the total taxable value of land held for all beneficiaries of the fixed trust.

Each beneficiary of a fixed trust who is an absentee person and has received their own land tax assessment must also make a separate notification.

Once you have notified us that you are an absentee owner, your land tax assessments will include the absentee owner surcharge. We assume that your absentee owner status is current until you tell us otherwise.

Access the portal

Failing to tell us you are an absentee owner is a notification default under the Taxation Administration Act 1997. When this happens, you are 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

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. If you cannot access the portal, call us on 13 21 61.