In this, the second in our series of articles looking at land tax exemptions, we will look at the exemption available when you purchase land in order to construct a new home or renovate an existing home.
In our last article on land tax we explored the exemptions that might apply when you move house – you can access this article here.
In future articles, we will look at the exemptions for primary production land and rooming houses amongst others.
Building and Renovating
This article looks at the situation when you have bought either vacant land to build a home on or an existing home that you intend to renovate before you move in.
As you may be aware, when you buy vacant land, it is common, even for those who are well prepared, for the construction of a new home to take 12 months or more. This means that you are likely to hold the land on 31 December when land tax is assessed. Clearly, if the build isn’t complete then the property can’t be your principal place of residence.
Equally, if you purchase a property to renovate then it may be that 31 December comes around before you move in – and again the property isn’t your principal place of residence.
In both cases, there is a risk that you may be assessed for land tax on the property.
Who is eligible?
The land must be owned by the person who will reside in the property once construction is complete.
There are some further categories for specific cases such as fixed trusts and a right to reside – but these are beyond the scope of this article.
The landowner must also not be claiming the Principal Place of Residence concession in respect of any other property that they own. That is, subject to certain exemptions you can only have one principal place of residence at a time.
Clearly, the exemption won’t usually be available for properties owned by companies or trusts.
Other Exemption Requirements
There are a number of other requirements that include:
- Construction work must have started but not been completed on 31 December. The works start date is the earlier of the issue of a planning permit and the commencement of construction. The works are deemed to be finished when the occupancy permit is issued;
- The owner intends to occupy the land for a continuous period of more than 6 months once the construction work is complete; and
- The owner is not deriving any income from the land.
Other Points to Note
The exemption is available for a maximum of 4 years – noting that the conditions will need to apply in respect of each of the years that the exemption is completed.
For someone constructing a typical home where the build period is in the 9 to 15 months range this suggests that the exemption will be available for one and possibly two years.
Application Required
It is important to be aware that the State Revenue Office won’t automatically apply this exemption.
You will need to apply for it – most likely as an objection to the land lax assessment when you receive it. Please be aware that there are time limits for land tax objections. Whilst it is possible to apply for the exemption out of time – that does create one more potential obstacle to getting the exemption.
Warning
You also need to be aware that if your circumstances change – you may find that the State Revenue Office withdraws the exemption and then claims the land tax from you.
An obvious example is if you don’t move into the property once the construction / renovation is complete.
Concluding Thoughts
Land Tax is an ever-increasing burden on Victorian property owners.
This exemption may allow a landowner who has purchased land to build a home on or a property to be renovated before occupation to avoid paying land tax in respect of the period before they move in.
However, the rules are relatively technical and we recommend that you obtain advice in a timely fashion before you lodge an application for the exemption.
At Lewis O’Brien and Associates, we stand ready to assist property owners with their property law questions and problems – including advising on the availability of and assisting with land tax objections.
Lewis O’Brien
Your Preferred Property Lawyer