Home owners in metropolitan Melbourne may soon be required to pay thousands in Land tax to the State Revenue Office, as amendments to the State Taxation Act will remove the land tax exemption for owners of contiguous land (land that sits on more than one title) from their 2020 Land Tax assessment. Prior to changes announced in the 2019 state budget, home owners whose principal place of residence comprised of more than one title were exempt from paying Land Tax on the contiguous land. This separately titled land may include a tennis court, pool, garden, or even just a small strip of land that happens to sit within the property boundary. For properties located within metropolitan Melbourne, this exemption is now a thing of the past. Home owners in regional Victoria can breathe easily- here, the exemption still applies. Likewise, owners of apartments and units with separately titled carparks or storage cages will also be exempt.
For example, let’s say Jane lives in a house in metropolitan Melbourne with a total site value of $2 million. Jane has a prize-winning rose garden in her backyard, which happens to be separately titled, and that contiguous land that makes up Jane’s rose garden had a site value of $500,000. Jane, as the owner of the property on the 31st of December, will have to pay land tax on the site value of her rose garden, totalling $775.00.
Where property owners may be hit hard is where they own an investment property that they’re already paying land tax on. For example, if Jane owned an investment property worth $900,000.00, normally her land tax would be $2,475.00. However, the additional site value from the contiguous land from her home would push her up into the next tax bracket, so her total land tax becomes $6,175.00. That’s a $3,700.00 increase, just for living on a property with more than one title. This tax is payable annually, meaning Jane could easily be out of pocket for tens of thousands of dollars within a few short years.
Home owners may find themselves facing additional challenges, which may include incurring stamp duty when purchasing a principle place of residence with multiple titles, and further restrictions on borrowing. Concerningly, home owners receiving Centrelink benefits, for example those on an age pension could potentially have their benefits reduced or even cancelled if the contiguous land is valued as an asset worth over $265,250.00.
Home owners wishing to avoid paying land tax on contiguous land that’s part of their principal place of residence, will only be able to do so by lodging a plan of consolidation with Land Use Victoria. This plan allows an applicant to legally combine two or more parcels of land (i.e. two titles) into a single entity. This process requires the services of a surveyor, lodgement of the plan with the Land Title Registry, issue a new certificate of title, and approval from the local council. While this process may sound overwhelming, it can save you thousands, if not tens of thousands of dollars in land tax.
We can help, and for a limited time we’re pleased to announce a special offer of $110 off lodgement of a plan of consolidation. Simply mention this offer when you appoint us to assist with the lodgement of your plan of consolidation.