The Victorian Labor Government has released its budget for the 2019-2020 year. One of the changes the Treasurer announced in the budget was in respect of the land tax principal place of residence exemption.
If you have a principal place of residence over two titles, you are currently entitled to an exemption for both of those titles – provided the second title is contiguous with the title on which the residence stands, enhances the value of the residence, and is used solely for the private benefit and enjoyment of the person who occupies the residence. However, the Government has announced that from the 2020 land tax year onwards there will no longer be an exemption available for the second title, and you will only get a land tax exemption for the title on which your residence has been built. Any second title which might include your garden, a tennis court or a swimming pool, for example, will no longer be entitled to the exemption. This means that you will pay land tax on that title – which could be quite an expensive liability moving forwards.
How could the changes affect you?
The Treasurer has said that you can get around this measure simply by consolidating your titles into one title for a price of around $600. But what does that mean for the future?
Those people who have multiple titles may not wish to consolidate them, because when it comes time to sell their properties, it would be difficult to deconsolidate those titles once again prior to sale.
The Government has been encouraging older Victorians to downsize as they get to the point where they no longer need homes, but this measure could act against that and disincentivise them from downsizing.
If you'd like further information about this measure get in touch with a Pitcher Partners’ specialist.