Absentee fixed trusts

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 Clara and Ravi, who each hold an equal beneficial interest in the trust land. Clara is an absentee person and therefore the ABC Fixed Trust is an absentee trust. Clara and Rave own no other land.

ABC Pty Ltd’s 2026 land tax liability

The taxable value of the land held under the ABC Fixed Trust is $1 million. The absentee owner surcharge rate is 4%. 

To calculate the land tax payable by ABC Pty Ltd for the 2026 land tax year:

1. Land tax is assessed on the trust land at the trust surcharge rate i.e. $8,163.
2. The taxable value of the land that is held for the absentee beneficiary (Clara) is multiplied by the absentee owner surcharge of 4%. As 50% of the trust land is held for Clara, the taxable value held for Clara is 50% of $1 million = $500,000. The absentee owner surcharge is $500,000 × 4% = $20,000.

The total land tax assessed for ABC Pty Ltd on the trust land is $8,163 + $20,000 = $28,163.

Example 2

This example uses the same details as Example 1 above, except ABC Pty Ltd has made a notification of the beneficiaries of the trust.

Therefore, Clara and Ravi 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 means Clara and Ravi are each deemed to be the owner of 50% of the trust land.

ABC Pty Ltd’s 2026 land tax liability

To calculate the land tax payable by ABC Pty Ltd for the 2026 land tax year:

1. Land tax assessed on ABC Pty Ltd on the trust land at the general rate of land tax i.e. $4,650.
2. The taxable value of the land that is deemed to be owned by the absentee beneficiary (Clara) is multiplied by the absentee owner surcharge of 4%. As 50% of the trust land is deemed to be owned by Clara, the taxable value owned by her is $500,000. The absentee owner surcharge is $500,000 × 4% = $20,000.

The total land tax assessed for ABC Pty Ltd on the trust land is $4,650 + $20,000 = $24,650.

Clara's land tax liability

To calculate the land tax assessed on Clara (as deemed owner and absentee beneficiary):

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 $300,000 and $600,000 is $13,350 plus 4.3% of the amount over $300,000. The tax assessed is $13,350 + (($500,000 - $300,000) × 4.3%)). $13,350 + $8,600 = $21,950.
2. A deduction is applied to avoid double taxation, being the lesser of:
   1. Clara’s share of the trust land multiplied by the tax assessed on the trustee (excluding the absentee surcharge), i.e. 50% × $4,650 = $2,325 plus the taxable value of the trust land deemed to be owned by Clara multiplied by 4% (i.e. $500,000 × 4% = $20,000). $2,325 + $20,000 = $22,325.
   2. Taxable value of the trust land deemed to be owned by Clara divided by the taxable value of all land owned by Clara multiplied by the tax assessed for Clara (i.e. $500,000 ÷ $500,000 × $21,950 = $21,950).

The lesser of the 2 calculations is $21,950.

The tax payable by Clara after applying the deduction is $375 (i.e. tax assessed $22,325 less deduction $21,950).

Ravi's land tax liability

To calculate the land tax assessed on Ravi (as deemed owner): 

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 $300,000 and $600,000 is $1,350 plus 0.3% of the amount over $300,000. The tax assessed is $1,350 + (($500,000 - $300,000) × 0.3%)) = $1,950. 
2. A deduction is applied to avoid double taxation, being the lesser of:
   1. Ravi’s share of the trust land multiplied by the tax assessed on the trustee (excluding the absentee owner surcharge) (i.e. 50% × $4,650 = $2,325). 
   2. Taxable value of the trust land deemed to be owned by Ravi divided by the taxable value of all land owned by Ravi multiplied by the tax assessed for Ravi (i.e. $500,000 ÷ $500,000 × $1,950 = $1,950).

The lesser of the 2 calculations is $1,950. 

The tax payable by Ravi after applying the deduction is $375 (i.e. tax assessed $2,325 less deduction $1,950).

Example 3

Delta Pty Ltd is trustee of the Delta Trust, which is a fixed trust. The beneficiaries are Jose, Fatima, Sam and Mya who each hold an equal (25%) beneficial interest in the trust land. Sam and Mya are absentee individuals.

Delta Pty Ltd must notify us that:

• the Delta Trust is an absentee trust
• the percentage of the taxable value of the trust land held by absentee persons is 50%.