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The Low-Down on Land Tax for Property Investors

How does land tax work?
Land tax is a state revenue. In Victoria, you pay land tax if the total taxable value of all the Victorian land you own, individually or jointly, as at 31 December, is equal to or exceeds
$250,000 ($25,000 for trusts). Exempt land is not included in the total taxable value of land you own. The rate of tax you pay depends on the total taxable value of all your taxable land.
You may have to pay land tax if you own, either individually or with others, any of the following in Victoria:
– Investment properties, including residential rental properties
– Commercial properties such as retail shops, office premises and factories
– Holiday homes
– Vacant land

Is land tax deductible?
Land tax liabilities may be deductible, depending on when the land tax liability arises. The timing of when you incur a liability to pay land tax will depend on the relevant state legislation. Your liability to pay land tax does not rely on the lodgement of a land tax return or on the taxing authority issuing a land tax assessment. In many states, the year in which the property is used for the relevant purposes determines when you are liable, even if an assessment does not issue until a later date. When you receive land tax assessments in arrears, the amount of land tax is not deductible in the income year in which you pay the arrears. The land tax amounts are deductible in the respective income years to which the liability for the land tax relates.

If a land-owner receives a land tax assessment for a year, then later in the same financial year either sells the property or starts to use it as their residence, there is no requirement to apportion
the land tax deduction. We consider that the land tax liability was incurred for an income producing purpose because the liability for it was founded in the property’s use for income-producing purposes. In the event of the property being sold and there being an adjustment of the land tax, the recovered amount should be declared as rental income by the vendor.

For any further assistance on calculating your claimable deductions, or if you have questions about the financial elements of your investment property, please call us – we’re more than
happy to answer any of your questions at any time.

Contact us today:
Torquay (03) 5261 2262
Winchelsea (03) 5267 2673