Trusts eligible for an exemption from the absentee land tax surcharge


On 30 October 2017 the State Taxation Acts Further Amendment Bill 2017 (Vic) was introduced into the Legislative Assembly to amend the Absentee Owners Land Tax Surcharge (AOS} provisions contained in the Land Tax Act 2005 (Vic).  

The most significant change is to extend the current AOS exemption that is only available to companies, to trusts.  This will allow property holding trusts which carry on an active business that contributes to the Victorian economy to be exempt from the AOS.  The Industry has been lobbying for this amendment since the inception of the AOS provisions so this is a welcome change. 

The AOS applies a 1.5% surcharge to all land owned by entities that are deemed to be controlled by absentee persons in addition to the standard land tax levied.

The key changes are as follows

  • Extension of the Absentee controlling interest exemption to Absentee Trusts

  • Clarification of the imposition of AOS in land ownership structures that involve chains of trusts.

Extension of Exemption

Prior to this amendment, only absentee corporations were able to seek an exemption from the AOS.

The proposed amendments seek to extend the exemption to Absentee Trusts. It is expected that the Treasurer will release guidelines (similar to that which exist for Absentee Corporations) as to when the State Revenue Office (SRO) will exercise its discretion favourably to exempt the trust from the AOS. 

The guidelines applying to Absentee Corporations provide that corporations whose commercial activities make a strong and positive contribution to the Victorian economy and community by engaging local labour and utilising local materials and services may be exempt from the AOS.  The SRO also consider the involvement of the Absentee Person in the activities of the corporation as the exemption is generally granted to corporations that operate locally, without significant influence from absentee persons.

Clarification of imposition of AOS and chains of trusts

The amendment makes it clear that it is the ultimate Absentee Beneficiaries’ underlying interest in the land that will determine the amount of the AOS to be levied. Previously, only the Absentee status of the owner of the entity which directly holds an interest in the landholding trust would be considered. The amendment ensures that the AOS is calculated based on the absentee beneficiary’s proportion of their interests in the land subject to an absentee trust.

If you would like to discuss the changes or would like more information, please contact: 

Stephen O'Flynn
Partner, Tax
ShineWing Australia
T +61 3 8635 1986

Abi Chellapen
Associate Director, Tax
ShineWing Australia
T +61 3 8635 1905