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Understanding absentee trusts
Trusts with certain absentee beneficiaries may pay the land tax surcharge.
Key information
If you are an absentee owner, an absentee owner surcharge applies to your land tax.
The absentee owner surcharge is 4% from the 2024 land tax year onwards. It is applied on top of the general land tax and trust surcharge rates.
An absentee owner includes an absentee trust.
Definition
An absentee trust can be a discretionary trust, a unit trust or a fixed trust, which has at least one beneficiary who is an absentee person.
In the case of a:
- fixed trust, the trust has at least one beneficiary who is an absentee person and has a beneficial interest in land held subject to the trust.
- unit trust, the trust has at least one unitholder who is an absentee person
- discretionary trust, the trust has at least one specified beneficiary who is an absentee person.
The absentee owner surcharge does not apply to excluded or administration trusts, or child maintenance land.
Chains of trusts
If a beneficiary of a trust (the first trust) is a trustee of another trust (the second trust), you have a chain of trusts. A chain has 2 or more layers of trusts.
To work out if the first trust is an absentee trust, look through all the trusts in the chain. For example, if a beneficiary of the second trust is an absentee person, the second trust and the first trust will both be absentee trusts.
Apex Pty Ltd is trustee of the Apex Unit Trust and owns taxable land in Victoria. The units in the Apex Unit Trust are held by Base Pty Ltd as trustee of the Base Trust, which is a discretionary trust. The specified beneficiaries of the Base Trust are both absentee individuals.
The Base Trust is an absentee trust because it has at least one specified beneficiary who is an absentee person. In turn, the Apex Unit Trust, is an absentee trust because its unitholder is an absentee person. Therefore, Apex Pty Ltd as trustee of the Apex Unit Trust will be liable for the absentee owner surcharge.
Learn more about how the surcharge is calculated on a chain of trusts.
Exemption
An absentee beneficiary may be eligible for an exemption. The exemption means an absentee beneficiary is treated as a beneficiary who is not an absentee. As a result, the trust is not considered an absentee trust.
The exemption may apply to trustees of absentee trusts:
- which are Australian-based
- whose commercial activities contribute to the Victorian economy and community by using local labour and materials
- which show good corporate behaviour with a history of compliance with Australian laws.
The exemption does not apply if the trustee of an absentee trust is merely a property investor or landlord.
The Treasurer’s guidelines, published in the Government Gazette, explain how exemption decisions are made.
For the 2019 land tax year onwards, refer to the Treasurer’s guidelines issued on 1 October 2018. These guidelines include examples of how build-to-rent developments may qualify. The exemption ends when the development is completed. Then, the absentee owner will be considered a passive investor or landlord.
Apply for an absentee owner surcharge exemption
Notify us
If you are the trustee of an absentee trust that owns taxable land on 31 December, you must notify us by 15 January of the following year.
You can also tell us about any change to your absentee owner status by updating your details in our absentee owner notification portal.