Tax Alert - Reminder of changes to Victorian land tax exemption for principal place of residence

Lowe Lippmann Chartered Accountants

Reminder of changes to Victorian land tax exemption for principal place of residence

It is always important to carefully consider if changing the use of your principal place of residence (PPR) may impact your eligibility to the exemption from land tax in Victoria.

In Victoria, a PPR exemption from land tax may continue or be granted where the individual owner (or vested beneficiary) is temporarily absent from their PPR. This may include examples such as working interstate or overseas.

For this exemption to apply for a (land tax) assessment year, the owner (or vested beneficiary) must have either obtained a PPR exemption or used the property as their PPR for at least six consecutive months immediately before the absence and satisfy the Victorian State Revenue Office (SRO) that:

the absence is only temporary;
the individual owner (or vested beneficiary) intends to resume occupation of the PPR after their temporary absence;
no other land in Australia is being treated as their exempt PPR during their temporary absence; and
the no income requirement is satisfied.

The no income requirement

The no income requirement means the PPR exemption does not apply to a tax year if any income was derived from the land in the year preceding the tax year.

For the 2021 tax year, there was a transitional arrangement whereby the owner or trustee could still qualify for the temporary absence PPR exemption if they rented the land for six months or less in 2020.

The rental requirement

Prior to the 2021 tax year, a rental requirement preceded the no income requirement.

The rental requirement was satisfied if the owner (or trustee) did not rent out the land for six months or more in the year before the assessment year during the period of absence.

We note that land tax is assessed on a calendar year basis at midnight on 31 December before your assessment is issued. For example, the land you own at midnight on 31 December 2022 is used to calculate land tax in 2023 (ie. between 1 January and 31 December 2023).

Clearly the rental requirement is not satisfied, and the PPR exemption is not available if the individual owner (or trustee) rents out the land for six months or more in the year before the tax year.

With easy access to platforms such as AirBNB, making a PPR available for rent during times when the property is temporarily vacant can be a consideration for some owners, in particular when they are overseas for a period of time for work or holidays.

However, it is important to remind ourselves that deriving any income from your PPR after 1 January 2022 can fail the no income requirement and your PPR exemption from land tax in Victoria could be lost.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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