Land Tax & Home-Based Businesses
Many property owners are familiar with land tax in Victoria applying to holiday homes, investment properties, and commercial premises. However, recent audit activity by the State Revenue Office (SRO) has highlighted a lesser-known area of exposure: home-based businesses.
Land Tax Overview
Land Tax in Victoria is assessed annually based on the total taxable value of land you own as at31 December of the previous year. While exemptions exist for your Principal Place of Residence (PPR) and Primary Production land, these exemptions may be partially removed if your home is used for business purposes.
Home-Based Business Details
Operating a business from your home does not automatically exempt you from land tax. The SRO has recently increased audit activity targeting homeowners who run businesses from their residence — including those using a shed, garage, or dedicated room.
While the legislation hasn’t changed, the threshold for land tax liability has.
What Is A “Substantial Business Activity”
To determine whether you will be liable for land tax it will depend on whether your home-based business meets the definition of a “substantial business activity” under Section 62 of the Land Tax Act 2005. Revenue Ruling LTA.001V2 outlines factors the SRO considers, including:
- Gross income of $30,000 or more from the business
- Use of more than 30% of the land or building for business
- Employment of staff or contractors (excluding resident family members)
- Council permits for business operation
- Income tax deductions claimed for business use
Data Matching & Audit Activity
The SRO uses data from various sources, including the Australian Taxation Office (ATO). Information such as business addresses, income, contractor payments, and payroll filings may be used to identify potential land tax liabilities.
Threshold Change from 2024
From 2024, the land tax threshold was reduced from $300,000 to $50,000. This significantly increases the number of landholders who may now be liable.
For example:
- A home-based business using 20% of the property for business purposes
- If the land’s taxable value is $400,000, then $80,000 (20%) may be subject to land tax
- Under the new threshold, this portion now exceeds the $50,000 limit, triggering land tax liability
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