Earlier this year, changes were made to the Land Tax Act 2005 to restrict the land tax exemption that currently applies to land that adjoins the principal place of residence of the taxpayer. The changes were made by amending the definition of principal place of residence in section 54(3) of the Land Tax Act 2005 to only include land that contains the home of the taxpayer on it.
Prior to the changes, separately titled land that adjoins land containing the home of the taxpayer – and which may be used for such things as garden space, a pool, or a tennis court – was exempt from land tax. Effective from the 2020 land tax year, separately titled land that adjoins land containing the home of the taxpayer will no longer be exempt from land tax.
This change will catch out taxpayers whose principal place of residence landholding spans over more than one title of land. In comparison to the above, taxpayers whose principal place of residence landholding is contained within a single title will continue to obtain land tax exemption as their home is located on the same title as the adjoining land.
For those landholders considering mechanisms to avoid land tax being imposed on separately titled landholdings, regard should be had to consolidating titles of land that are used as part of their principal place of residence.
Finally, it is noted that the above changes will not apply to landholdings in regional Victoria and thus will only apply to homes within metropolitan Melbourne.
This article is intended for general discussion and is not intended to represent specific advice. Banks Group shall not be responsible for any entity that acts on any of the comments in this article without first obtaining specific advice from Banks Group.