Land Tax Alert – Change to Surcharge Exemption Guidelines: Can you obtain exemption from Victorian absentee owner land tax surcharge?

by | Oct 18, 2018

The Victorian Treasurer has issued revised guidelines for exemption of absentee corporations and absentee trusts from absentee owner land tax surcharge.

Readers who are unfamiliar with the surcharge and scope for exemption are referred to the accompanying article which provides an overview of these matters. That article also sets out some suggestions for action.

Exemption Guidelines Revised

The Revised Guidelines continue to provide that, in determining whether the Commissioner of State Revenue should allow an exemption, the Commissioner should consider:

  1. the extent to which the absentee corporation or absentee trust is Australian-based;
  2. whether the absentee’s “commercial activities made a significant contribution to the Victorian economy and community by engaging local labour and utilising local materials and services”; and
  3. whether the absentee exhibits good corporate behaviour.

The key changes from prior versions are:

  • express acknowledgement that property development can be a commercial activity which may amount to making a significant contribution to the Victorian economy; and
  • recognition that developers building to rent (as distinct from building to sell) may be making a significant contribution to the Victorian economy while the development is being undertaken.

The first point might be considered unremarkable.

However, the second point represents a significant revision of the previously stated position that development of property with a view to holding it as an investment was a wholly passive activity and, therefore, did not meet the criterion of making a significant contribution to the Victorian economy (thereby lessening the likelihood of an exemption being granted).

While this change is favourable for entities undertaking build-to-rent activities, note that the criterion can only be met during the period in which the development is undertaken – once the build-to-rent development is complete, the absentee company/absentee trust will be considered to have ceased to make a significant contribution to the Victorian economy and, therefore, no longer eligible for the exemption.

The revised Guidelines were issued on 1 October 2018. In practice, they will be relevant to the 2019 land tax year.

Action Point: Previous decisions not to pursue exemption may need re-visiting.


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