Can you benefit from changes to the Principal Place of Residence Land Tax exemption

Late last year the Victorian Government enacted changes to the land tax rules that affect the principal place of residence (PPR) exemption of properties located in metropolitan Melbourne.

From 1 January 2020, the PPR exemption no longer applies to land that is contiguous to the land that contains the PPR.

What is contiguous land?

‘Contiguous land’ for the purpose of Land Tax means adjoining land or land separated only by a road or other similar area across which movement is reasonably possible. 

Contiguous land must not contain a separate residence, and must enhance the PPR Land and be used solely for the private benefit and enjoyment of the owner.  A separate residence is a building affixed to the land which is capable of separate occupation. Generally, a building without all the amenities of an ordinary home, such as kitchen and bathroom facilities, is not considered a separate residence.

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

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.

Are there any exemptions?

There are exemptions that apply where:

• the 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); or
• the adjacent land is consolidated onto a single title together with the PPR land.

Most land owners would by now have received their 2020 Land Tax assessments – some possibly for the first time!  Many land owners may not appreciate that they could avoid this new tax if they consolidate their titles.  Those that are aware of the exemption and are proactive, could consolidate their titles in time for the 31 December 2020 cut off and avoid a Land Tax bill in 2021.

Next steps

This change in the law poses as an opportunity for land surveyors.  We anticipate that this year there will be an increase in the number of land consolidations undertaken by land owners.  Some land owners may not know what to do on the receipt of what could be their first land tax assessment.  This could be a good time for you to:

1. review your files and remind past clients that they could be affected by this change in the law; and
2. advise them that there may be a solution.

This article has been written by Senior Associate, Chris Vlahos and is intended for information only. For specific advice in relation to your circumstances please call Septimus Jones & Lee on 9613 6555.