Will you be paying tax on land next to your home from 2020?
Land that a person owns and occupies as their home, or ‘principal place of residence’ (PPR), is generally exempt from land tax. In Victoria, the exemption has also historically extended to separately titled land that was ‘contiguous’ with the PPR land, did not contain another residence and was used for domestic purposes together with the home.
‘Contiguous land’ means adjoining land or land separated only by a road or other similar area across which movement is reasonably possible.
The most common examples of ‘contiguous land’ used by homeowners include a separately titled tennis court, swimming pool or extended garden beside the title on which their house is located.
From 1 January 2020, separately titled contiguous land in metropolitan Melbourne will no longer be included in the exemption that applies for a PPR. This change will not be ‘grandfathered’, so you will not continue to qualify for the exemption just because you were previously entitled to it. Only the title that has your residence located on it will remain exempt from land tax.
As a result, some taxpayers are facing the prospect of being charged thousands of dollars on separately titled contiguous land every year by the State Revenue Office. Exceptions apply for:
adjacent land on a single title together with your home (for example, if you consolidate your PPR title and the ‘contiguous land’ title by 31 December 2019, being the relevant date for the 2020 Land Tax year);
your PPR and the contiguous land are wholly in ‘regional Victoria’ (specified municipal districts and alpine resorts );
the contiguous land is a separately titled car park or storage cage connected to a unit or apartment in metropolitan Melbourne; or
the taxable land held by the taxpayer, including the contiguous land, is valued under the ‘tax-free threshold’ (currently $250,000).
The policy intent behind this change seems to be to prompt economic activity by making ‘vacant’ land more costly to hold.
If this change will impact you, please contact your property lawyer who will be able to discuss this with you in more detail.
Article (extract) supplied by Hall and Wilcox Lawyers.