Land Tax (Vic) and Home-based businesses

Are you producing scented candles in your laundry, leasing out your shed or pottery in th garage to earn some extra cash? A side hustle at home to make ends meet may make a portion of your home (Prime Place of Residence - PPR) subject to land tax.

There is nothing new about this but there has been recent media attention that the State Revenue Office (SRO) has been conducting land tax audits on home-based businesses.

To check whether or not this may affect you, visit the links below.

https://www.sro.vic.gov.au/sites/default/files/revenue-ruling-lta-001-v2.pdf

A partial PPR exemption

Partial exemption if land is used for business purposes

Where a substantial business activity is conducted on land being used as a PPR, an exemption will apply only to the portion of the land which is used exclusively for residential purposes by the individual owner, vested beneficiary or the person with the right to reside.

The apportionment is based on either the floor space of a building or land area. The Commissioner may consult with the Valuer-General regarding apportionment.

Partial exemption if a separate residence on PPR land is leased

If the PPR land contains a separate residence on the same title, such as a granny flat or bungalow, which was used to derive income from the provision of accommodation in the year preceding the tax year, then land tax will be assessed on the part of the land that contains the separate residence. The remaining part of the land used and occupied as a PPR will be exempt.

The PPR exemption will continue to apply to the whole land if the owner of the land is only receiving a small or nominal payment for board or lodging, or where a family member merely contributes towards utility costs, maintenance, repairs or similar expenses for the property. These payments would not meet the ordinary legal meaning of the term ‘rental income’.

For Further information : https://www.sro.vic.gov.au/land-tax/do-i-have-to-pay-land-tax#156