Warning – SMSFs with Residential Property!

Hello Chasers,

The proposed change to the Vacant Residential Land Tax (VRLT) in Victoria will have a significant impact on SMSF trustees with residential property in the state.

The expansion of the VRLT to apply to all Victorian vacant residential land represents a substantial change in policy and a keen desire by the heavily indebted Victorian Government to raise more tax

Who will be affected?

The proposed change will affect SMSF trustees with residential property in Victoria that is vacant for more than six months in a year. This includes properties that are not being rented out, or that are only being used as holiday homes on a casual basis.

What are the implications?

The VRLT is an annual tax that is charged at a rate of 1% of the capital improved value (CIV) of the taxable land. The CIV value can be substantially higher than the unimproved value that land tax is imposed on.

This means that SMSF trustees with vacant residential property could face a significant tax bill. For example, an SMSF trustee with a vacant residential property in Melbourne with a CIV of $1 million could face a VRLT bill of $10,000 per year.

What are the exemptions?

There are a number of exemptions to the VRLT, including:

  • Primary places of residence (PPRs)
  • Primary production land
  • Properties that are occupied by the owner for at least four weeks of the year and the owner has a PPR in Australia
  • Workplace or business properties occupied by the owner for at least 140 days of the year for the purpose of attending their workplace or business.
  • Commercial residential premises
  • Residential care facilities
  • Land used for supported residential services or retirement village services.

What should SMSF trustees do?

SMSF trustees with residential property in Victoria should review their property portfolio to determine whether they are likely to be affected by the proposed change to the VRLT. If they are, they should consider their options, such as selling the property, renting it out, or transferring it to themselves personally and using it as their PPR.

SMSF trustees should also seek professional advice to ensure that they are complying with all of their tax obligations.

If you need further information regarding this latest tax grab from the Victorian State Government, please contact our office on 03-55612643.

Have a great day!

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