Expats & Land Tax in Vic - We are Seriously Screwed. This is My Example....

Discussion in 'Accounting & Tax' started by MindMaster, 7th May, 2017.

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  1. MindMaster

    MindMaster Well-Known Member

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    The last time I paid land tax in Vic, I paid four times the standard amount because I'm an expat. Not impressed. With my current land tax, I need to pay ten times the standard amount!!!

    Details
    A property in Sunshine (Albion) with a taxable value of $468,000
    $711 land tax if I am not an absentee land owner
    $7,731 land tax as an absentee owner

    Can't help feeling very disappointed and exploited by the way the state revenue office is charging expats for land tax.

    So what to do with buy/develop and holds?
    -sell up and invest interstate (tempting as a matter of principle but no)
    -only buy and hold future properties interstate (depends on the numbers but most likely)
    -no change in strategy, just one more expense (no chance, reduces yield by almost 1%)

    Be interested to hear others thoughts on expats and land taxes in Vic.
     
  2. Dean Collins

    Dean Collins Well-Known Member

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    Are you an Australian citizen living in China?

    Or are you an Chinese national that is investing in Australia to minimize risk in which case....do returns really matter (eg see it as a "cost of doing business" in order to protect assets - this is the way that the Vic govt sees it).
     
  3. Joynz

    Joynz Well-Known Member

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    Are you talking about the 1.5% surcharge for 'absentee individuals'?
    Absentee individuals | State Revenue Office
     
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  4. MindMaster

    MindMaster Well-Known Member

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    I'm an expat, an Australian citizen living and working in China

    Not sure, on the state revenue office website, the category is absentee owner.
     
  5. Dean Collins

    Dean Collins Well-Known Member

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    You need to inform Vic SRO that you are an Australian citizen.

    As an Australian citizen you don't have to pay the Absentee Land Tax (you still have to pay regular land tax though eg for multiple properties....that aren't your PPOR - at least thats the way it works for us in NSW).

    Check out this url - Absentee individuals | State Revenue Office

    the part I'm referring to is below

    An absentee individual is any individual who:

    1. Is not an Australian citizen or permanent resident,
    2. Does not ordinarily reside in Australia, and
    3. Was absent from Australia:
    • on 31 December of the year prior to the tax year, or
    • for more than six months in total in the calendar year prior to the tax year
    Are you an absentee individual?
    There are up to four steps to determine whether an individual is an absentee person:

    • Step 1: Is the individual an Australian citizen or permanent resident?
    If yes, the individual is not an absentee person. If no, go to step 2.

    • Step 2: Does the individual ordinarily reside in Australia?
    If yes, the individual is not an absentee person. If no, go to step 3.

    • Step 3: Was the individual absent from Australia on 31 December?
    If yes, the individual is an absentee person. If no, go to step 4.

    • Step 4: Was the individual absent from Australia for more than six months in total during the year prior to the tax year?
    If yes, the individual is an absentee person. If no, the individual is not an absentee person.
     
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  6. MindMaster

    MindMaster Well-Known Member

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    Damn, I'm so stupid (no comments needed). Kept on misreading step 1 and going to step 2. Am I an Australian citizen? Yes!!!

    Thanks Dean for making me read it again. You've been a great help.

    Will be calling the SRO first thing Monday morning. That makes this thread useless. Sorry every one.
     
    Last edited: 7th May, 2017
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  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    "absentee person" is defined under s3 Land Tax Act VIC
    LAND TAX ACT 2005 - SECT 3 Definitions

    Aust citizens are not absentee persons. So it sounds like the surcharge won't apply to you. See Part 4 of LAND TAX ACT 2005 - SCHEDULE 1

    But if there are trusts involved the trust could easily be an 'absentee trust' if a 'specified beneficiary' who is an absentee could benefit from the trust.
     
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  8. Joynz

    Joynz Well-Known Member

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    It does seem odd that you had to pay four times the standard amount last time (as per OP) as the old surcharge was only 0.5%.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Im quite confident its impossible to boost land tax by 300% through any such issue. This better describes that many taxpayers beleive they know rules when they dont. They overpay tax through seeking to save money. Same with income tax, CGT etc....

    A personal property savvy tax adviser would bypass such worries. I question if overpaymnet of past land tax has occurred and how it impacts comonwealth income tax.
     
  10. MindMaster

    MindMaster Well-Known Member

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    Called the State Revenue Office Monday and spoke to one of the people there who was very helpful.

    Turns out that everyone with a foreign address is classified as an absentee owner and charged their eye watering rate for non Aussies. To fix this, you just email them proof of citizenship such as a passport.

    They said they'll sort out my classification/status, take care of past excess land tax paid and get back to me within 60 days.
     
  11. Dean Collins

    Dean Collins Well-Known Member

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    Glad it worked out and was able to help.

    Lol about the classification and overseas address.......(and yes you made me log in to check NSW OSR and nope they hadn't switched us over due to living in NY :) ).
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    That is a bit draconian isn't it!

    Does that mean that everyone with an Australian address will fall through the gaps even if they are a foreign person?
     
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  13. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Not really - OSR and other agencies clearly use media and ask for taxpayers to check their correct registration for that very reason. No better way to get people to call you to correct any error than by charging them too much !!

    I reckon 99% of people will tell if their land tax seems too high but very few people seem to know when they have underpaid a tax. Yet they know so much about IPs and tax...I think some put their head in the sand and hope the problem goes away ?

    The key revenue problem and risk remains with those who use an AU address who should pay the surcharges etc. OSR try to communicate this and even PC is an avenue for that education to occur. I believe NSW and Vic have used Chinese / Vietnamese and other foreign media extensively so non-english persons affected are more likely to know. REAs and PM also have been asked to communicate with their clients and were sent special brochures in a variety of languages.

    The problem is that a taxpayer isnt able to avoid tax by claiming not to know about it. How old is land tax ? I still have people own 2 IP who become clients from other agents etc that claim they have never heard about land tax. They think if they are meant to pay they will get a bill. They get a surprise too when they go to sell and get a major arrears and cant claim a deduction for some of it.
     
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  14. Danyool

    Danyool Well-Known Member

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    Almost as silly as having to 'register' for land tax - they should already know!
     
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  15. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Good solicitors and conveyancers generally mention it in their settlement letter - I see them all the time. Problem with using title is it doesnt mean a lot. Titles dont reflect all forms of ownership eg a trust isnt shown. A company may be o title and act as trustee for more than one trust etc

    The new property / land register being constructed by ATO and shared with states may see all this change but I suspect it will just catch avoiders.
     
  16. Danyool

    Danyool Well-Known Member

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    Did your brain read it as "Australian citizen or permanent resident [for tax purposes]" - I've got confused on something like that before.
     
  17. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Vic Land Tax has a nasty ruling on not keeping the Commissioner informed of your absentee (ie citizenship etc) position within 30 days of any change or by 15th January. The ruling only addresses a tax shortfall and can lead to a 0% to 90% penalty plus interest