Victorian land tax is assessed annually on the taxable value of Victorian land owned at midnight on 31 December of the previous year. The tax is calculated by reference to the site value of taxable land, and aggregation can materially affect the rate that applies.

For corporate property groups, the key issue is that land held in separate companies may not always be assessed separately. Where corporations are sufficiently related, the Commissioner may group them and assess the landholdings as if they were held by a single corporation. Group members can also be jointly and individually liable for the group’s land tax.

This can turn what looks like a tidy asset-holding structure into a more expensive land tax profile.

Key Issues

1. Are the relevant companies related through ownership, voting rights, board control or indirect control?
2. Is there a common controlling interest across the companies?
3. If the companies are related, is there a basis to argue that they should not be grouped?

Key Findings

The starting point is control. Corporations can be related where one controls the other’s board, controls more than 50% of votes at a general meeting, or holds more than 50% of issued share capital. The rules also extend to common controlling interests, combined holdings, indirect relationships, trustees and nominees.

That means grouping risk can arise even where there is no simple holding company structure. A review should trace who really controls the companies, not just who appears on title. It should consider shareholders, voting rights, board appointment rights, trusts, nominees and practical management arrangements.

Importantly, related status does not automatically decide the matter. The Commissioner has a discretion to group related corporations. In exercising that discretion, the SRO’s public ruling says relevant factors may include the purpose and history of the structure, any land tax avoidance purpose, the degree of relatedness, day-to-day operational control, interrelationship between the corporations, and the use of the land.

The practical result is that the grouping analysis is fact sensitive. A group of companies with common owners, common directors, shared management, common funding, related activities and similar land use is likely to attract closer attention. Genuine commercial separation may help, but it needs to be supported by evidence.

The risk can also be retrospective. The SRO’s published position is that if related corporations were previously assessed separately and the Commissioner later groups them, assessments or reassessments may be issued within the permitted reassessment period.

Takeaways

• Review structure before buying land. Grouping should be checked before the acquisition, not after the assessment arrives.
• Look through the register. Shareholdings, voting power, board control, trusts, nominees and indirect ownership can all matter.
• Keep evidence of separation. If companies are genuinely separate, make sure board minutes, funding, management, records and land use support that position.
• Do not ignore old years. If grouping risk has existed for some time, prior year exposure should be considered.
• Act quickly on assessments. Objections generally need to be lodged within 60 days after receiving an assessment or reassessment.

To discuss Victorian land tax grouping and related surcharge issues, please contact Velocity Legal’s tax team.

‍This article in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.