Victorian Government’s Potential Land Tax on Home-Based Businesses: What You Need to Know
If you operate a small business from home in Victoria, you may soon face an unexpected financial burden. The Victorian State Government, through the State Revenue Office (SRO), is reportedly considering levying land tax on properties used for business purposes—even if it’s your primary residence.
What’s Changing?
Traditionally, land tax applies to investment properties, commercial properties, and holiday homes. However, the SRO has begun scrutinizing home-based businesses, assessing whether a portion of a residential property should be subject to land tax based on business use.
If your home is currently exempt from land tax because it is your principal place of residence (PPR), but you run a business from it, the government may argue that part of your home is used for commercial purposes and should be taxed accordingly.
The family home has always been exempt from land tax so long as business income derived from it is less than $30,000 and the value of the property is below a certain threshold.
The main change that has created this potential issue for homeowners is because the Victorian Labor government changed land tax thresholds from 2024, dropping the level it kicks in from $300,000 to $50,000.
By way of example, if the unimproved land value of your home is $1 million and business activities generate more than $30,000 from 10 per cent of the land, the taxable land is now $100,000 and draws a tax bill of $975 where previously it would have been exempt. The rate is higher, up to a maximum of 2.65 per cent ($2650 extra), if you own multiple properties.
See video below
Who Could Be Affected?
This potential change could impact a wide range of small business owners, including:
- Freelancers and consultants using a dedicated home office
- Tradespeople and contractors storing tools, equipment, or vehicles at home
- Health and wellness professionals running clinics from home
- Online retailers managing inventory and shipping from their residence
What Does This Mean for You?
If implemented, this could result in:
- Additional land tax obligations if part of your home is deemed a business premises
- Possible reassessment of your primary residence exemption
- Increased compliance requirements and scrutiny from the SRO
What You Can Do
- Review Your Business Setup: Consider whether your business activities at home might be classified as a commercial use.
- Seek Professional Advice: Every case is different, so it’s crucial to understand how this could apply to your specific situation.
- Monitor Government Announcements: Stay updated on any legislative changes or official rulings from the SRO.
- Consider Alternative Solutions: If you’re concerned about potential tax liabilities, you may want to explore co-working spaces or alternative business premises.
Final Thoughts
This potential land tax development highlights the importance of staying informed and proactive in managing your tax obligations. If you run a business from home and are concerned about how these changes may affect you, now is the time to review your situation.
If you’d like tailored advice on how to navigate these potential changes, feel free to reach out to our team. We’re here to help you make informed financial decisions and ensure your business remains tax-efficient.
