The land tax rate reductions are shown in this table
|Land Value||Previous Rate||New Rate|
|Less than $200,000||Nil||Nil|
|$200,000 - $225,000||0.2%||Nil|
|$225,000 - $539,999||0.2%||No Change|
|$540,000 - $899,999||0.5%||No Change|
|$9000,000 - $1,190,000||0.8%||0.8%|
|$1,190,001 - $1,619,999||1.2%||0.8%|
|$1.62 Million - $2.7 Million||1.8%||1.3%|
|$2.7 Million +||3%||2.5%|
As the table shows, the current tax-free threshold of $200,000 is to increase to $225,000. The Government expects that this will remove approximately 28,000 taxpayers from Victoria's land tax system.
What is special land tax?
Special land tax is imposed when the use of a piece of land changes from a tax exempt use to a taxable use. The rate is 5% of the taxable value of the land.
Land which is currently exempt, but which is subject to special land tax on a change in use, includes:
If the change in use occurs:
The reason for the change in use is immaterial under the Land Tax Act 2005.
Land tax operates independently of income tax (in particular CGT) consequences that may apply upon a change in ownership.
In the May 2007 Budget, the Victorian Government announced two key changes:
Land in the 'metropolitan area' is equivalent to land in 'greater Melbourne'. Despite the current distinction between urban and non-urban zone land, it appears as though special land tax will be abolished in respect of both forms of land. We will have to await the final form of legislation to be sure.
The Government has not announced how it proposes to address the current perceived unfairness flowing from either zoning changes or the compulsory acquisition of land by Government authorities from private landowners.
As a result of the announced changes farmers in the metropolitan area:
If a zoning change or compulsory acquisition leads to a change in use, then the indications are that a concession will be available.
The Government expects that the changes will simplify the current regime and ensure that it operates more equitably.
The changes were announced in the 2007/08 budget papers and are not yet law. As with all state Government tax reform initiatives, the devil is invariably in the detail. Taxpayers subject to Victorian land tax will therefore need to wait until legislation is enacted in the coming months to fully understand the practical scope of the changes on their land holdings.
If you would like more information about this article or land tax generally, call Maddocks on 03 9288 0555 (Melbourne) and ask for a member of our Tax & Revenue team.
Daniel is a lawyer in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.