Under the principal place of residence exemption, landholders are exempt from land tax in respect of the land they own and occupy as their home.
The current exemption extends to titles adjacent to the title on which the principal residence stands, so long as the adjacent title:
- enhances the value of the residence, and
- is used solely for the private benefit and enjoyment of the person who occupies the residence.
It should be noted that tennis courts and gardens on separate titles generally fall into this category.
What are the new changes?
Where adjoining properties on separate titles are not consolidated, the principal place of residence land tax exemption will no longer apply for the adjacent properties on separate titles. Land owners will only be granted a land tax exemption for the title on which their residence is built subject to the limited circumstances referred to below.
From 1 January 2020, once the new changes are implemented the exemption will be significantly restricted. Going forward, landholders will only be able to claim the principal place of residence exemption for adjacent titles if:
- both titles are located entirely in regional Victoria, or
- where the principal place of residence is an apartment or unit in metropolitan Melbourne, the adjacent title is a separately titled car park and/or storage space.
Property owners facing this issue may wish to consider consolidating their titles to ensure that the exemption can be claimed over all of the land.
Property owners facing this issue may wish to consider consolidating their titles to ensure that the exemption can be claimed over all of the land. In order to do so, individuals will need to engage a surveyor and lodge a plan of consolidation with Land Use Victoria. If an individual chooses to consolidate their land, they will not after consolidation be able to separately deal with their adjacent title.
Please note that land tax is assessed at midnight on 31 December 2019 for the 2020 year and accordingly, the survey and consolidation process must commence shortly in order to ensure the principal place of residence exemption is available for all adjacent land.