This article provides some background information on land tax and how to object to an assessment.

What is land tax and are trusts taxed differently?

Land tax is an annual tax levied on the total taxable value of all the land owned in Victoria, unless an exemption applies.

The land tax thresholds and rates for both the general rates and trust surcharge rates are set out in the attached Annexure. The general rates apply to land owned by individuals, companies and SMSFS, that are regulated and complying. The trust surcharge rates generally apply to land held on trust for fixed, discretionary and unit trusts.

The trust surcharge rates are higher than general rates but there is no difference between the general and trust surcharge rates when the total value of the taxable land is $3 million or more.

Who values land?

Land in Victoria is subject to an annual valuation by the Valuer-General Victoria (VGV) which provides valuations for council rates and land tax assessments. The VGV conducts annual valuations as at 1 January. For example, for 2024 land tax assessments, the Victorian State Revenue Office (SRO) relies on valuations made by the VGV on 1 January 2023. The VGV must follow best practice guidelines in undertaking its annual valuations.

The valuation, for land tax purposes, is based on the site or unimproved value of the land only, and excludes improvements such as buildings.

Councils issuing rate notices also rely on annual valuations by the VGV. However, council rates are sometimes based on the capital improved value (CIV) which reflects the market value of the land including improvements (eg, buildings and fixtures); in contrast to the unimproved value used for land tax purposes.

While this article focuses on land tax it is worth noting that the SRO levy vacant residential land tax (VRLT) and the windfall gains tax based on the CIV of the land. For further information on VRLT click here.

Objecting to a valuation

If an owner is not satisfied with the valuation:

• in respect of land tax, they can lodge an objection with the SRO; and
• in respect of council rates, they can lodge an objection with their local council.

Note that an objection against council rates may be more appropriate in cases where the rates are payable in relation to a financial year. This is because rates payable for the 2024/25 financial year for the period of 1 July 2024 to 30 June 2025 are based on the valuation from the VGV of 1 January 2024. In contrast, this January 2024 valuation will not be relied on by the SRO until the 2025 calendar year in striking the 2025 land tax assessment for the property. Thus, a successful objection against the valuation for council rates purposes should feed through to the following year’s land tax assessment.

An objection must be lodged within 60 days from the date of the relevant notice or assessment.

If an owner is arguing the assigned value on their land is too high, they should ensure that they have adequate evidence to justify this, including recent evidence of comparable properties and ideally an independent market valuation provided by a registered valuer.

Preparing and lodging an objection

There must be a valid basis for an objection. An owner cannot simply object or complain that the amount of land tax is too high. For example, a valid basis for objecting against a valuation by the VGV includes where:

• the value is not representative of the market value;
• the apportionment of interests held by various persons in the land is not correct; or
• the area, dimensions or description of the land are not correctly stated in the land tax notice.

Note that an assessment remains payable by the due date despite an objection being lodged. Thus, unless paid on time, late payment interest accrues. If the objection is wholly or partially allowed, a refund of any overpaid amount plus interest is payable.

An objection needs to be appropriately prepared as poorly drafted and vague objections will likely be rejected.

Do you qualify for a land tax exemption?

Although a valuation is a common basis for objecting against land tax, an owner may also object on the basis that they believe they qualify for an exemption or a different classification.

The most popular types of exemptions from land tax are a person’s principal place of residence (PPR) and primary production land (PPL).

Broadly, land that is owned, used and occupied by a (natural) person as their sole or principal place of residence is generally exempt from land tax.

Broadly, an owner may also rely on an exemption if the land is used principally for primary production or in a business of primary production. Different eligibility criteria apply depending on where the (PPL) land is located, eg, whether the land is:

• wholly outside of greater Melbourne;
• wholly or partly within greater Melbourne but not within an urban zone; or
• wholly or partly within greater Melbourne and wholly or partly within an urban zone.

Naturally, if an owner seeks to rely on an exemption that has not been recognised in a prior land tax assessment, they must ensure they satisfy the eligibility criteria and outline this in their objection.

Note the SRO conducts various checks, reviews and audit activities to determine whether exemptions are properly claimed.

Are there any risks?

The onus is on the taxpayer to outline why the valuation is excessive and what the correct value should be together with any supporting evidence. One risk of objecting is that it results in the land being more closely scrutinised. Furthermore, the prior valuation could be increased rather than decreased as an outcome of the objection. This risk is minimised by obtaining appropriate advice and assistance from an eligible and approved valuer before proceeding with an objection. A letter and no more from an estate agent is usually insufficient for this purpose.

The time, cost, uncertainty and stress relating to an objection also needs to be considered in view of any potential upside.

Conclusions

The significant increase in land tax and cost of living pressures is giving rise to a greater number of inquiries from people wanting to object against their council rates and land tax. In some cases, these costs exceed any potential rent or yield that can be derived from the land.