Land tax objections can attract ‘greater scrutiny’, warns law firm
Recent changes to land tax rules and increasing property values is driving an increase in objections against land tax assessments, says a specialist law firm.
Changes in Victoria to the general land tax free threshold and the introduction of a land tax surcharge are driving some property owners to object against their land tax assessments, according to DBA Lawyers.
In a recent article, DBA Lawyers senior associate Shaun Backhaus said Victoria recently reduced the general land tax free threshold to $50,000, which was previously $300,000 prior to January 2024. This resulted in an estimated 380,000 more land owners paying land tax in Victoria.
“A land tax surcharge, in addition to land tax, has also been imposed to assist repaying the Government’s COVID debt,” said Backhaus.
Backhaus said 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,” he said.
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.
The law firm explained that 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 such as buildings and fixtures; in contrast to the unimproved value used for land tax purposes,” said Backhaus.
If an owner is not satisfied with a valuation for land tax, Backhaus said they can lodge an objection with the SRO. If it’s in respect of council rates, they can lodge the objection with their local council.
Backhaus said 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,” he said.
“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.”
The law firm also reminded practitioners and their clients that 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,” he said.
“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.”
Backhaus said 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.
Land owners may also want to check if they qualify for a land tax exemption, he added.
Backhaus stressed that 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,” he said.
“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.”
