Crucial deadline looms for foreign owners of Victorian property

HLB Mann Judd partner Josh Chye said the AOS is levied on foreign individuals who own residential properties in Victoria, but are not ordinarily residents in Australia.

“This surcharge is in addition to the standard land tax and aims to address the impact of absentee ownership on the local property market,” said Mr Chye in a recent article.

The AOS has been increased to 4 per cent for the 2024 land tax year and applies to Victorian land that is owned by an absentee owner.

“If you are an absentee owner at 31 December, you must notify the government before 15 January 2024,” said Mr Chye.

The VRLT affects property owners who own a home in middle and inner Melbourne that has remained unoccupied for more than six months of the calendar year.

“VRLT is equal to 1 per cent tax on the capital improved value (CIV) of the property. For example, if the taxable property has a capital improved value of $500,000, the applicable tax will be $5,000,” said Mr Chye.

“For VRLT to not apply, the property must be a primary place of residence (PPR) or be subject to a bona fide lease arrangement. Mere availability for occupation, such as being listed on a short-term rental website, is insufficient.”

HLB Mann Judd senior tax consultant Timm Gavenlock said where AOS and VRLT apply to a property owner’s circumstances, they are required to disclose this to the Victorian government.

Failure to do so when investing in the Victorian residential property market may result in penalty taxes.

“This can be 5 per cent of the total assessed amount if you voluntarily let the State Revenue Office (SRO) know you are an absentee owner before they start an investigation or 20 per cent of the total assessed amount if you tell the SRO after they start an investigation,” said Mr Gavenlock.

“[It can be] up to 90 per cent of the total assessed amount if the SRO believe you intentionally disregarded the law and hindered their investigation.”

Property owners must also notify the SRO before 15 January 2024 where the VRLT applies to their circumstances, he said.