Get advice before paying land levy

If you earn income from your home – whether from renting out part of it or from running a home-based business – you’ll need to declare that income to the tax office and pay tax on it. Recently, however, some people have also been pursued for land tax.

Land tax is charged every year at a percentage of the total value of your land holdings. The rates and thresholds vary between states but what they all have in common is an exemption for your main residence. The tax is normally payable only on investment and commercial properties.

As a result of a data-matching exercise conducted with the ATO, some State Revenue Offices (SROs) have started issuing land tax demands to homeowners who earn an income from their home. Those who rent out part of their home through Airbnb have been particularly affected but, in theory, anyone who runs a home-based business could be targeted.

This compliance action is legally questionable; in many cases, the main residence exemption should be available and no land tax is due. Every case is different, however, and it’s impossible to generalise. What we can say for certain is that if you get one of these demands, don’t just pay up. Take advice first from a legal or tax professional who specialises in state taxes, and if it looks as if your SRO has made a mistake, don’t hesitate to challenge the assessment.