Why you may have received a Land Tax Bill

Tuesday March 19, 2019

Why you may have received a Land Tax Bill

Over the next few weeks many property owners, executors and trustees may receive an unpleasant surprise - a Land Tax bill

In this Alert Mark Williams of PerformWorks, a licenced estate agent and registered valuer, explains why you received a Land Tax bill in the first place; what you should do now, noting that you have only 60 days from your date of notice to object; how you can better plan and prepare for next year; why 2019 is different from previous years and what should you do when this year's Council Rates arrive. 

Why did you receive the bill?

The State Revenue Office (SRO) assessed that, as at midnight on 31 December 2018, the total Taxable Value of the land you own is $250,000 or more.  If the land is held in a trust, the Taxable Value exceeds $25,000.

The SRO uses the Site Value from your Council Rates as the basis of its Taxable Value.  Site Value (or Taxable Value) is the unimproved value of your land - which means it excludes capital improvements such as buildings.

What you should do now

  • Take a close look at your Statement of Lands issued by the SRO and correct any errors.
  • Ensure that exempt land such as your home (principal place of residence) and/or a farm classed as primary production land is excluded from the Statement. 
  • You should also be careful to add land not included in the Statement, remove land you no longer own and remove any exemptions for which you are not entitled. 
  • Remember that your ownership is deemed to be as at midnight on 31 December 2018. So even if you’ve sold the property, if it’s not exempt, and you didn’t settle until 2019, you’re probably still liable for land tax.
  • Assessments are based on occupancy, not title, so check if land that should be included in one valuation has been valued separately and vice versa. 
  • If you own the property with another party or parties, make sure that the interests held in land and the valuation amounts are correctly apportioned.

You have 60 days from your date of notice to lodge an objection

Having checked for errors, the next step is to check the Taxable Value for each property.  If, based on comparable evidence, you disagree with the valuation, you can lodge an objection to the SRO.  The objection must be lodged within 60 days of receiving your notice.

Whilst you may feel aggrieved that the tax is “just too high”, that’s not grounds for objection.  Your objection must state the amount you contend is the correct Taxable Value and provide detailed, relevant and recent comparable evidence to support your opinion of the Taxable Value.

You should obtain further information in relation to the Taxable Value of the property in order to make a fully informed decision whether to object, bearing in mind an objection may draw attention to a Taxable Value which is too low, and could be increased.

If you lodge an objection, you should still pay the land tax in accordance with your assessment to avoid incurring penalty interest.  If your objection is allowed, you will receive an appropriate adjustment for your payment.

How can you better plan and prepare for next year?

The key is to prepare this year for next year’s assessment.  Facts must support your opinion.  You should monitor sales in the area.  Create a table like the one below for each comparable property.  Don’t forget to collect and file relevant brochures and property reports too.

Address: Rental per annum:
Date of sale: Outgoings per annum:
Sale price: Lease term:
Land area: Options:
Gross building area: Basis for rent reviews:
Net lettable area: Description of building condition:

Why 2019 is different from previous years?

In Victoria, the property valuation cycle changed from once every two years to once a year.  From 1 July 2018, the State Government’s Valuer General Victoria (VGV) is responsible for setting the annual values used by Council for rating purposes.  This annual cycle should smooth out movements in value and, if you’re properly prepared, should deliver a fairer alignment with the ups and downs of the property market.

What should you do when this year's Council Rates arrive

When your Council Rates arrive around August of this year, pay attention to the valuations on the notice:

  • Site Value (SV) - SV is the market value of the land only.  As mentioned earlier, it is this value that the SRO terms Taxable Value;
  • Capital Improved Value (CIV) - CIV is the market value of the land plus buildings and other improvements to the land;
  • Net Annual Value (NAV) - NAV is either 5% of the CIV or the net annual rental (the rent you receive after paying outgoings such as insurances, land tax and maintenance costs, but excluding Council rates) whichever is the greater. For residential properties, the NAV is 5 percent of the CIV.  Most Councils adopt the CIV as the basis for rates.  As one exception, the City of Melbourne uses NAV. 

Almost everything (there’s a separate discussion about a thing called a Supplementary Valuation) about your rates and property taxes flows from the annual valuation in your Council Rates notice.  You should monitor it closely for accuracy.  Challenges to Council Rates and Land Tax Assessments must be made within 60 days from the issuance of the respective notice.  It is too late for you to be challenging your current Council Rates.

How we can help

In the first instance please contact a team member in our Property & Conveyancing department at Hicks Oakley Chessell Williams Lawyers on 03 9550 4600.

Sarah Lindsey, Principal Lawyer