Special land tax is imposed when certain types of land that are exempt from paying land tax, cease to be exempt land for that purpose. An understanding of what land is considered “exempt land” under the Land Tax Act 2005 (Vic) ("Act") therefore is critical to understanding when special land tax will be imposed.

Exempt land

Under the Act, a person may be exempt from paying land tax for a number of reasons. For example, exemptions may apply if the land is:

  • used as a “principal place of residence”: section 54;
  • used to a sufficient standard for “primary production”: sections 65-68;
  • owned by a non-profit organisation, used primarily for sporting, recreational or cultural purposes, and an exemption has been granted by the State Revenue Office ("SRO") for that use: sections 71-72;
  • owned by a charitable institution, or used exclusively for charitable purposes, and an exemption has been granted by the SRO on that basis: section 74;
  • used by a health centre or service exclusively for the purposes of that body: section 74A;
  • used to provide certain kinds of accommodation, and an exemption has been granted for that use by the SRO: sections 75-78; or
  • Crown land, or land owned by a public statutory authority or municipal council: sections 79-81.

Currently there are 18 different bases upon which a person or body could be exempt from paying land tax.

Special land tax

Special land tax is only imposed when certain types of exempt land cease to be exempt land for that purpose. In this regard it is a “one off” tax.  Importantly, not all types of exempt land will be subject to special land tax when they cease to be exempt land.

Special land tax can only be imposed when the following seven kinds of exempt land cease to be exempt land (see section 30).  This is usually because the SRO deems that there has been a change of use or ownership:

  • land owned by a non-profit organisation and used for sporting activities and/or outdoor recreationalor cultural activities: section 72;
  • land used and occupied as a “rooming house” within the meaning of the Residential Tenancies Act 1997 (Vic), primarily for low cost accommodation by people with low incomes: section 75;
  • land occupied or available for occupation as a “residential care facility” (within the meaning of the Aged Care Act 1997 (Vic)) or “supported residential service” (within the meaning of the Supported Residential Services (Private Proprietors) Act 2010 (Vic)): section 76;
  • land occupied or available for occupation as a “residential service” within the meaning of the Disability Act 2006 (Vic): section 76A;
  • land used as a “registered caravan park” within the meaning of the Residential Tenancies Act 1997 (Vic): section 77;
  • land owned by a public statutory authority: section 80;  and
  • land used exclusively as a mine: section 86.

Importantly, the Act was amended in 2007 so that special land tax can no longer be imposed on land that ceases to be used primarily for primary production.

In addition, special land tax does not apply if land ceases to be exempt land only because it is compulsorily acquired.

Who is liable for special land tax?

A liability for special land tax arises when the land on which the tax is imposed ceases to be exempt land.

If special land tax is imposed because of a change of ownership (or within 60 days of a change of ownership) the previousowner is liable to pay the special land tax.

In all other circumstances, the new owner of the land is liable to pay special land tax.

What is the rate of special land tax?

If you are an absentee owner, the rate of special land tax is 5.5% of the taxable value of the land.

In all other cases the rate of special land tax is 5% of the taxable value of the land.

When must special land tax be paid?

Section 14 of the Taxation Administration Act 1997 (Vic) provides that tax is payable on or before the day specified in the notice of assessment.

This must be 14 days or more from the day the notice is served on the taxpayer.

Can I defer the payment of special land tax?

If special land tax is imposed because of a change of ownership(or within 60 days of a change of ownership) you cannot defer the payment of special land tax.

If special land tax is imposed for any other reason, payment may be deferred.  The payment may be deferred until ownership of any part of the land changes, or 3 years after the day the land ceased to be exempt land (whichever is sooner).