What is the AOS?
The AOS is an annual tax payable on Victorian land owned by an absentee owner at the rate of 1.5% from 1 January 2017.
An absentee owner includes any of the following:
an individual who is not an Australian citizen or an Australian permanent resident visa holder and who was absent from Australia on 31 December of the preceding land tax year or was absent from Australia for at least six months in the preceding land tax year;
a corporation incorporated outside Australia or a corporation in which a greater than 50% interest is ultimately held by one or more absentee persons; or
a trust with an absentee beneficiary.
The AOS is payable in addition to normal land tax, the VRLT and the Federal Government’s annual vacancy fee (which is discussed further here).
If you are an absentee owner of land in Victoria as at 31 December of any year, you must notify the SRO of your absentee status by 15 January of the following year.
What is the VRLT?
The VRLT is an annual tax payable on residential properties in Melbourne’s inner and middle suburbs which are unoccupied for more than six months in any calendar year. The rate of the VRLT is 1% of the capital improved value of the relevant property.
The VRLT is payable in addition to normal land tax, the AOS and the Federal Government’s annual vacancy fee.
Please refer to our previous bulletin if you would like further details on the VRLT, including the exemptions that may apply.
You must notify the SRO by 15 January of the following year if you owned residential property within the relevant council areas that was vacant for more than six months in a calendar year.
Why is notification important?
The SRO is actively pursuing taxpayers who have not complied with their AOS and/or VRLT notification obligations. The failure to notify is a notification default and penalty tax under the Taxation Administration Act 1997 (Vic) can apply.
If a notification is not made by the relevant due date and the SRO subsequently determines through its compliance activities that a property is subject to the AOS and/or VRLT, penalty tax (generally between the rate of 20% and 90% of the applicable additional tax) may be imposed in addition to the tax.
If a notification was made to the SRO for previous land tax years, a new notification is only required if your circumstances have changed.
A group of related companies controlled by absentee persons owns a portfolio of residential properties in Melbourne’s inner and middle suburbs as at 31 December 2018, which have an unimproved value of $5 million.
A number of the properties owned by the companies have been vacant for more than six months during the 2018 calendar. The aggregate capital improved value of the vacant properties is $7.5 million.
The companies are absentee corporations as at 31 December 2018 (as they are controlled by absentee persons) and are therefore required to notify the SRO of their absentee status for the AOS. The total amount of the AOS payable by the companies would be $75,000.
Further, the companies are also liable for the VRLT on the residential properties that were vacant for more than six months during the 2018 calendar year and are therefore also separately required to notify the SRO of these properties. The amount of VRLT payable by the companies would be $75,000.
If the required notifications are not made by 15 January 2019 and the SRO commences an investigation, significant penalty tax could be imposed in addition to the total primary tax of $150,000.
If you are unsure whether the AOS or VRLT applies to your Victorian landholdings, please contact us as soon as possible. We can also assist by considering whether any exemption from the AOS or VRLT applies to your situation.
If the notification obligations apply to you but you have not previously made a notification, or your AOS or VRLT circumstances have changed since the last notification to the SRO, we can assist you to make the relevant notifications to the SRO as soon as possible.