Property update: Land tax — narrowing of exemption on property adjoining principal place of residence

Nov 28, 2019

From 31 December 2019, the land tax exemption for separately titled land adjoining a principal place of residence will no longer apply to certain metropolitan land owners.

The current exemption

Currently, certain land adjoining a person’s principal place of residence is exempt from land tax if the land:

  • is owned by the same person that owns the principal place of residence;
  • shares a common border with the principal place of residence or is separated from the principal place of residence only by a road, railway or other similar area across or around which movement is reasonably possible;
  • is used solely for the private benefit of the person using and occupying the principal place of residence and has been doing so:
    • since 1 July of the year before the tax year; or
    • if the owner became the owner on or after 1 July in the year before the tax year, from a later date during that year;
  • enhances the principal place of residence in some way; and
  • does not contain a separate residence.

Examples of exempt land include separately titled land used as a tennis court, swimming pool or garden area.

The changes

The major changes made to the Land Tax Act 2005 mean that the exemption will no longer apply to separately titled land adjoining a principal place of residence in Metropolitan Melbourne.

Metropolitan home owners who also own land adjoining the principal place of residence on 31 December 2019 will be liable to pay land tax in respect of the adjoining land for the 2020 land tax year onwards.

The principal place of residence title itself will still be exempt from land tax.

Where land adjoining a principal place of residence and the principal place of residence is located in regional Victoria, the exemption may still apply if the criteria noted above are met.

What to do?

Affected land owners should consider consolidating titles to their principal place of residence with adjoining land so that land tax does not have to be paid in respect of the adjoining land.

More information

For more information on the changes to land tax, or assistance consolidating your titles, please contact Geoff Kliger, Senior Special Counsel, on (03) 8600 8878, Morgan Scholz, Senior Associate, on (03) 8600 8890, or Kylie Marotta, Lawyer, on (03) 8600 0756.

Authors

This Property update was co-authored by Kylie Marotta, Lawyer and  Geoff Kliger, Senior Special Counsel.

Note: This update is a guide only and is not intended to constitute legal advice.

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