Taxable Land

Land Tax is something you need to pay if you own vacant land, or land that holds an investment property, a holiday home, an apartment building, or a commercial property provided all this land has a total value of over $250,000 (buildings or other assets not included).

Land tax is calculated on the land/site value of all taxable land you own on 31 December.

Land that falls under your own home address, farm, charity building, or room shelter is exempt from being included in land tax.

Land Tax Threshold To Rise In 2022

From July 1, 2022, you will need to pay land tax when the total value of your taxable land is over $300,000. This is $50,000 more than the current taxable land threshold, which is $250,000.

This is the first change made to land tax in Victoria in over 10 years.

Land Tax To Rise in 2022

From January 1, 2022, more changes to Land Tax in Victoria will come into effect.

That is to say, the taxes will rise for land holders whose total amount of land exceeds $1.8 million in value.

Taxable Value of landholdings Increase legislated
$1.8 million to $3 million 1.3% to 1.55%
$3 million and above 2.25% to 2.55%

If you are wondering about land tax, you can use the Australian government’s land tax calculator.

Here are some real-world examples of the Land Tax increase.

Land Value Tax in 2021 Tax in 2022 Increase
$2,500,000 $18,475 $20,225 $1,750
$5,000,000 $69,975 $78,975 $9,000
$10,000,000 $182,475 $206,475 $24,000

 

The Potential Impact of the Land Tax Increase

Now that land tax in Victoria has been changed in these ways, we anticipate the following impacts:

  • Landlords may raise the price of their rent in order to cover the higher cost of land tax
  • Investors might be persuaded to buy land outside of Victoria that incurs cheaper land tax
  • Land priced between $250,000 and $300,00 may become more attractive to first-time land investors given that it is now below the land tax threshold
  • Land holders might be more willing to consider having unit block properties built on their land to draw in more tenants, given the higher price of tax
  • Current land holders may need to reshuffle the use of their land and assets to account for the increased land tax. The more land parcels an investor owns, the more their current arrangements will be affected as each individual parcel of land will have an individual tax hike
  • More than 60,000 tax payers – small businesses included – no longer have to pay land tax. The savings incurred will go somewhere else into the economy.
  •  Considering the rising challenges of finding tenants in the CBD during COVID-19, this may make urban property investment more challenging now that rent reduction is to become more counter-intuitive than it has been previously, given the higher tax on the property

If you have questions about land tax, Tick Box can help. Contact us today and we will provide you with clarity on all land tax-related matters.