Are You Aware of the Absentee Owner Surcharge?

AS OF 1 JANUARY 2017, Victorian land owned by an “absentee owner” is subject to an additional 1.5% Absentee Owner Surcharge.  The purpose of the surcharge is to require foreign buyers, who do not pay other taxes, to contribute to government services and infrastructure in Victoria.

Although this surcharge also applies to commercial property, it was originally introduced as an attempt to manage foreign purchasing of residential real estate in Victoria – to assist with housing affordability.

Who is an Absentee Owner?

An absentee owner is …

  1. Any individual that:
  • is not an Australian or New Zealand citizen or a permanent resident of Australia; and
  • does not ordinarily reside in Australia; and
  • was absent from Australia on 31 December of the year prior to the tax year, or for more than six months in total in the calendar year prior to the tax year.

1112. A corporation:

  • incorporated outside Australia;
  • or a corporation in which an absentee person, or that person together with another absentee person, have a controlling interest of the corporation;

1113. A trust which has at least one absentee beneficiary.

What is the Surcharge?

The surcharge is currently 1.5% charged on the site value, in addition to the general and trust surcharge rates of land tax.  If you are an absentee owner the surcharge applies in the following land tax year.

Are there Exemptions?

The following exemptions apply to the payment of the surcharge:

  1. If the land is exempt from land tax or if the total taxable value of the land is below $250,000;
  2. For corporations, if an absentee person holds a controlling interest in a corporation that is incorporated in Australia and owns land in their own right; and
  3. For absentee trusts, it will depend on the degree of interest and influence the absentee beneficiary has.

Consideration is also given to factors like how significantly a corporation or trust contributes to the Victorian economy and community, and whether the corporation or trustee of the absentee trust exhibits good corporate behaviour.

Requirements to Comply

If you are an absentee owner on 31 December (or absent for more than six months in the prior calendar year), you are required to notify the SRO before 15 January in the following year of your absentee owner status.

This can be done through the Absentee Owner Notification Portal on the SRO website.

Once you have notified the SRO that you are an absentee owner, your land tax assessment will be calculated to include the surcharge until you notify the SRO otherwise.  Accordingly, it is important to be aware of your resident status and notify the SRO as soon as you no longer meet the absentee owner criteria.

Bottom Line: A failure to notify the SRO that you are an absentee owner is a notification default under the Taxation Administration Act 1997 and may result in a penalty tax being payable on the surcharge amount of the land tax accessed.

The penalties can range from 5% if you voluntarily disclose your absentee status before the SRO commences an investigation and up to 90 per cent if the SRO believes you are intentionally disregarding the law and hindering any investigations.

Disclaimer: If you think a similar situation may apply to you, then you should contact us for detailed legal advice relating to the particular facts and circumstances of your property or lease agreement. This article is not intended to provide such detailed and specific advice. And, you should not act on the basis of any matter contained in this article without first obtaining more comprehensive professional advice.

Speak Your Mind