Absentee Owner Surcharges | Duties Act 2000 (Victoria)
From the 2020 land tax year, an absentee owner surcharge of 2% applies to Victorian land owned by an absentee owner. The surcharge was 1.5% from 1 January 2017 and 0.5% for the 2016 land tax year.
The absentee owner surcharge is an additional amount that applies over the land tax you pay at general and trust surcharge rates.
1. What is an absentee owner?
An absentee owner is an absentee person that owns land in Victoria, and can be:
- an absentee individual,
- an absentee corporation, or
- a trustee of an absentee trust.
Each of these terms has a specific meaning.
We recommend that you speak to your accountant to clarify whether status as an Absentee Owner applies to you.
2. When will the surcharge apply?
If you are an absentee owner at 31 December, the surcharge applies in the following land tax year.
The surcharge is calculated on the total taxable value of Victorian land you own and will be included on your Victorian land tax assessment. The surcharge calculation depends on who owns the land and how they own it. For example, if the land is jointly owned, owned by an absentee corporation that is part of a land tax group or owned by a trustee of an absentee trust that is a discretionary trust, unit trust or fixed trust.
The surcharge does not apply if land is exempt from land tax or if the total taxable value of your land(s) is below the threshold of $250,000 or $25,000 (if the land is held on trust and is subject to the trust surcharge rate).
3. Notification as an Absentee Owner
If you are an absentee owner at 31 December, you must notify the State Revenue Office, Victoria by no later than 15 January of the following year (2021).
Once you have notified that you are an absentee owner, your land tax assessments will include the absentee owner surcharge.
Failure to report as an absentee owner is a notification default under the Taxation Administration Act 1997. If this happens, you will be liable for penalty tax on the surcharge amount of land tax assessed in accordance with our revenue ruling on penalty tax and interest. This may be penalty tax of:
- 5% if you voluntarily advise that you are an absentee owner before an investigation,
- 20% if you advise you are an absentee owner after an investigation is commenced,
- Up to 90% if you intentionally disregarded the law and hindered any investigation.
4. Can a Foreign Trust be exempt from the surcharges?
The absentee owner surcharge is payable where the trust in question has a named beneficiary who is a foreign person. In order to become exempt from this surcharge, the trust must exclude the foreign person as a beneficiary of the trust.
However, as the exclusion would apply to a named beneficiary, this action may cause a resettlement of the trust and create capital gains tax consequences. Therefore, the ability to avoid payment of this surcharge is limited, and if this surcharge applies to your trust, you should contact your accountant for further guidance.
– Absentee corporations
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 that the corporation owning the land will not be considered an absentee corporation, and therefore will not be subject to 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. It does not apply to an absentee corporation that is incorporated outside Australia.
– Absentee trusts
From the 2018 land tax year, an absentee beneficiary in relation to an absentee trust may, in some circumstances, be eligible for an exemption.
The effect of the exemption is that the relevant absentee beneficiary is taken to not be an absentee beneficiary. If the exemption has been granted to all of the absentee beneficiaries, then the trust is not considered to be an absentee trust and not subject to the absentee owner surcharge.
*Note: The exemption is not intended to apply where the absentee corporation or trustee of an absentee trust is merely a property investor or landlord.
We strongly recommend that you contact our office to discuss your Property Trust Structures and to check your eligibility for an exemption.
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