Victoria has enacted an ‘absentee’ owner land tax surcharge of 1.5% on land owned by ‘absentee persons’, which include: ‘absentee individuals’; ‘absentee corporations’ and ‘absentee trusts’. This is under the Victorian Land Tax Act 2005 (the ‘Act‘).
Victoria has also enacted a land transfer duty surcharge, for foreign persons, with similar provisions, definitions and exemptions. This is under the Duties Act 2000 (Vic).
The definitions, of these terms, get to be quite complicated (by the time one looks behind trusts and companies that own Victorian land or purchase Victorian land).
As part of this mechanism, the Victorian Treasurer may (for land tax purposes, at present) exempt: an absentee person, :
- who holds an absentee controlling interest in a corporation, from being taken to hold that controlling interest (under s3B(2) of the Act); and
- an absentee beneficiary, in relation to an absentee trust, from being taken to be an absentee beneficiary of that trust (under s3BA(2) of the Act).
And the Treasurer must issue ‘Guidelines’ for the exercise of these exempting powers and publish them in the Government Gazette (under s3BB(2)).
The news item, here, is that the Treasurer did gazette relevant guidelines on 5 January 2018 (Victorian Government Gazette: S3, 5 January 2018).
The significance of the relevant exemptions will make more sense, if I explain where they fit in.
‘Absentee persons‘ include the following:
(a) ‘Absentee individuals‘ – are, broadly, individuals who are (i) not citizens or permanent residents; and (ii) don’t ordinarily reside in Australia; and (iii) were not in Australia on the relevant 31 December (or, alternatively, were not in Australia for 6 of the 12 months ending on that 31 Dec).
(b) ‘Absentee corporations‘ – are, broadly, companies which are not incorporated in Australia or have an absentee controlling interest. These in turn are, broadly, when an absentee person: (i) holds more than 50 per cent of the shares; (ii) can control the composition of the board; or (iii) can cast more than 50 per cent of the maximum number of votes at the corporation’s general meeting.
(c) ‘Absentee trusts‘ – are, broadly, (i) discretionary trusts, where an absentee person is a ‘specified’ beneficiary; (ii) a unit trust, where one of the unit holders is an absentee person; and (iii) a fixed trust, where a beneficiary is an absentee person, with an interest in the Victorian land.
The Guidelines state that the exemption is intended to apply to absentee owners that are:
- Australian-based (taking into account the nature and degree of foreign ownership or control); and
- make a significant contribution to the Victorian economy and community (taking into account, for instance: the number of people employed in Australian and the amount of local resources used); and
- exhibit good corporate behaviour (such as compliance with FIRB requirements, good governance and paying taxes).
They also say that the exemption is not intended to apply where the absentee owner is essentially a landlord or property investor (ie where its business in Victoria is wholly or primarily connected with the ownership, sale or purchase of land).
Similar Guidelines have also been gazetted for the purposes of the exemption from the foreign purchaser additional duty for residential property in Victoria under s 3E of the Duties Act 2000 (Vic).
[FJM; LTN 5, 9/1/18; Tax Month January 2018]
- Is the absentee land tax surcharge 1.5%?
- Can a citizen still be an ‘absentee individual’?
- Can the Treasurer deem an absentee controlling interest not to exist?
- Could the exercise of this exempting power save a foreign incorporated company (from being an ‘absentee corporation’)?
- Is it under s3BB that the Minister must gazette guidelines for the exercise of this exempting power?
- Is one of the guidelines, the degree to which the company or trust is Australian based or foreign?
- Is another factor, the contribution the absentee owner makes to the Victorian economy?