Be aware of absentee owner surcharge changes, warns Parke Lawyers
Recent changes to the absentee owner surcharge (an increased land tax liability that applies to Victorian land owned by an absentee owner), highlight the need for property investors to seek up to date financial and legal advice, according to Parke Lawyers.
The latest amendments to the Land Tax Act 2005, which came in to effect as from 19 December, extend the existing exemption available to absentee corporations conducting a commercial operation in Australia, to absentee trusts, subject to guidelines to be published by the Treasurer. The changes also affect how absentee owner surcharge liability is calculated for land held under a chain of trusts.
These changes to surcharge laws and the separate introduction of the Vacant Residential Land Tax to come into force on 1 January 2018, highlight the importance of owners and investors engaging professional assistance to protect their legal and financial position, Parke Lawyers Managing Director Jim Parke says.
Subject to certain exemptions, an absentee owner surcharge increases land tax on Victorian land owned by an absentee person – be they an individual, corporation or trust – who owns property.
For non-citizens or permanent residents who do not ordinarily reside in Australia, are absent from Australia on December 31 or for six months in one year; the surcharge will apply in the next land tax year.
The surcharge is calculated on the total taxable value of Victorian land owned and will be included in the Victorian land tax assessment.
Absentee owners must inform the State Revenue Office before 15 January 2018 using the Absentee Owner Notification Portal – www.sro.vic.gov.au/node/5773 Failure to notify may give rise to penalty tax liability under the Taxation Administration Act 1997 ranging from 5% to up to 90%.
Under the amendments to the Land Tax Act applicable to trusts, certain absentee beneficiaries of an absentee trust may be eligible for an exemption from the surcharge.
Mr Parke, who is an accredited business law specialist, says the effect of an exemption is that the absentee beneficiary is taken to be a beneficiary who is not an absentee beneficiary.
The result is that the absentee beneficiary who holds an exemption will not be considered an absentee beneficiary, and will be exempt from the surcharge.
The way the absentee owner surcharge is calculated for land held under a chain of trusts, or sub-trust, structure is also changing in the 2018 tax year.
If you are a specified beneficiary in a chain of trusts (in which a trustee holds an interest in a second trust on trust for a beneficiary of their trust), changes to the calculation of the surcharge may affect you.
The proportion of interests in the land subject to the trust held by absentee beneficiaries should be reviewed. If this has changed since the previous notification, authorities need to be informed of the updated interests.
The State Government advises that it is important to let authorities know if land is held under a chain of trusts, so that the correct information is at hand to ensure a correct assessment.