Since we published our recent article Land tax on your home? 6 ways you might get caught out, one particular risk area which we identified seems to have come to the fore – contiguous land.
You may have received a letter from the State Revenue Office (SRO) in recent months warning that you may be at risk of receiving a land tax assessment on “contiguous land” which you own. Unfortunately, these letters are worded vaguely, leaving people wondering what they need to do.
Wonder no more.
What is contiguous land?
In a nutshell, contiguous land means land which is adjacent to your home, but contained in a separate title.
Such land was historically considered part of a person’s principal place of residence or “PPR”, and treated under the Land Tax Act 2005 as exempt from land tax on that basis.
From 1 January 2020, that position changed – now, land contiguous to a PPR will only be exempt from land tax if it is:
- located in regional Victoria; or
- a car space or a storage cage associated with an apartment in metropolitan Melbourne.
This means that if your garden, tennis court or outbuildings are on a separate title, that land will be subject to land tax.
I received a letter from the SRO – what should I do?
If you’ve received a letter from the SRO stating that you own contiguous land, the first step is to work out whether your property is actually caught by the contiguous land provisions in the Land Tax Act.
This requires an examination of your title plans, and may require a surveyor to conduct a “check survey” to ascertain where the home is located relative to the title boundaries.
If there is more than one title but your home sits over all of them, this is not “contiguous land” – in these circumstances, all titles qualify for the PPR exemption and the SRO should be advised of that.
If your home doesn’t extend over all titles (for example, the home is contained within the boundaries of one title and the second title contains only garden and garage), then you have a contiguous title. In these circumstances, you have a choice to either consolidate the titles into a single title, or keep them separate and accept that you will pay land tax on the contiguous title.
What’s involved in consolidation?
Consolidation involves three key steps:
- Preparation of a plan of consolidation – you’ll need to engage a surveyor to do this.
- Obtaining consent from the local council to consolidate the titles – this will usually be handled by the surveyor.
- Registering the plan of consolidation at the Land Titles Office – this is handled by a lawyer.
If you want to ensure that the PPR exemption is applied to all of your land from 2023 onwards, you’ll need to ensure that the consolidation process is completed by no later than 31 December 2022.
Should I consolidate my titles?
When deciding to consolidate, the first thing to consider is your future intentions for the land.
If you’re considering the possibility of developing a second dwelling on the contiguous title, whether for sale or retention, then consolidating the land may not be recommended – you’d likely need to re-subdivide the land in the future to proceed with the development.
To decide whether consolidation is appropriate, you’ll need to weigh a number of different considerations, including:
- how long until you’re planning to develop the land and what your land tax liability would be during that period
- what costs would be associated with re-subdivision
- whether you’re likely to experience any difficulties getting council consent for a subdivision
It’s important that the tax consequences of consolidation are also considered – a tax accountant or lawyer with tax expertise can assist in that regard.
How we can help
If you’ve received a letter from the State Revenue Office about contiguous land or are worried that you may have a potential liability in this regard, get in touch with us. We’ll guide you through the specifics of how the new rules affect your land and ensure that you avoid any nasty surprises in the next round of land tax assessments.
Please contact us for more detailed and tailored help.
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