The assessment of land tax on land held by joint owners often creates confusion with the perception arising of duplication in land tax assessments relating to the same land. This perception originates because when land is held jointly, the SRO will issue two separate land tax assessments relating to the same land – one assessment to the joint owners collectively, and one assessment to each joint owner which is based on their ownership interest in the jointly owned land.
In relation to the land tax assessment issued to the joint owners collectively, section 38 of the Land Tax Act 2005 prescribes that this assessment is issued on the assumption that the joint owners collectively hold the land as a separate taxpayer. This means that (i) the assessment is issued as if the land was held by a single individual; and (ii) any separate landholdings held by the joint owners themselves is not aggregated when calculating the joint ownership assessment.
In relation to the land tax assessment issued to each joint owner, the proportional landholding held by each landholder within the joint ownership holding will also be included in the value of their total aggregated landholdings. The joint owner will then be required to pay land tax based on their aggregated landholdings in Victoria with a tax credit for their proportional share of land tax assessed in the separate joint ownership assessment. In certain circumstances however, the tax credit can be capped at a lesser amount than the land tax assessed in the joint assessment.
Because of how the land tax on the joint ownership assessment is calculated, each separate joint owner could separately be required to pay additional land tax in relation to the same land if they own other land which is required to be aggregated or own the jointly owned land in a trust which is subject to surcharge land tax rates.
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