Vacant residential land tax applies from 1 January 2018

Vacant residential land tax applies from 1 January 2018

Just another reason to stay home!

A “vacant residential land tax” applies from 1 January 2018 to homes in inner and middle Melbourne that were unoccupied for in excess of 6 months in the preceding calendar year.

The new tax is in addition to land tax, the absentee owner surcharge, and the federal annual vacancy charge.

The tax rate is 1% of the capital improved value (CIV) of the vacant property. The CIV is shown on the owner’s council rate notice.

“Vacant” means that for 6 months of the preceding calendar year a property has not been lived in by the owner, or someone permitted by the owner, as their principal place of residence, or a person pursuant to a lease arrangement. The 6 months does not need to be continuous. The lease can be short-term such as holiday rentals (e.g. Stayz and Airbnb), but must actually have been used and occupied for the six month period.

It isn’t sufficient for a property to be used by the owner’s friends and family on a casual basis. It must be either used as a principal place of residence or leased, but note the holiday home exemption below.

The tax applies to vacant homes in the following municipalities:

  • Banyule
  • Bayside
  • Boroondara
  • Darebin
  • Glen Eira
  • Hobsons Bay
  • Manningham
  • Maribyrnong
  • Melbourne
  • Monash
  • Moonee Valley
  • Moreland
  • Port Phillip
  • Stonnington
  • Whitehorse
  • Yarra

Land that is currently exempt from land tax will also be exempt from the vacant residential land tax. Further exemptions include:

  • Holiday homes
  • City apartments/homes/units used for work purposes
  • Property transfers during the year (ie ownership changes during the year will be exempt from tax in the following calendar year)
  • New residential properties (will be exempt from tax in the following calendar year).

Holiday homes – If a property is used as a genuine holiday home and occupied by the owner for at least four weeks of the preceding calendar year, it will be exempt from the vacant residential land tax. The owner must have also have had a principal place of residence in Australia in the preceding calendar year and can only apply the exemption to one holiday home each year.

Work purposes – if a city apartment, home or unit is occupied by the owner for at least 140 days of the preceding calendar year for the purpose of the owner attending their workplace, it will be exempt from the vacant residential land tax. The owner must have also have had a principal place of residence in Australia and the workplace must also be in one of the municipalities listed above.

Notification requirements & penalties

Owners of residential properties caught by the new tax in the municipalities listed above must notify the State Revenue Office (SRO) through its online portal by 15 January 2018!  If an exemption applies then the owner will need to advise the SRO which exemption applies.

Failure to notify may attract penalty tax. The SRO advises that it will be monitoring compliance including utilising data matching with other state and federal agencies.

For more information please contact our friendly and professional team at Peter Speakman & Co on 9822 8611.