Tax Insights for Your Home
Contact UsWhat to Know About Tax
Owning property in Victoria comes with a range of tax considerations. Whether you are renting out your principal residence, subdividing land or using a platform such as Airbnb, understanding how these activities may affect your tax obligations can help with planning and decision-making.
This overview highlights key considerations for homeowners in Warrnambool and surrounding areas.
Renting Out Your Principal Place of Residence (PPR)
Your Principal Place of Residence (PPR) refers to the home you ordinarily live in. If you rent out your property—whether partially or entirely—it may impact the way tax laws apply.
Some general points to be aware of include:
- Capital Gains Tax (CGT): Your PPR is usually exempt from CGT. However, if you rent it out, even for a limited time, the exemption may be reduced.
- Declaring Income: If you rent out a room or the entire home, the rental income typically needs to be reported in your tax return.
- Deductions: Certain property-related expenses, such as mortgage interest, rates, utilities or maintenance, may be claimable. Deductions usually relate only to the period or portion of the property used to produce income.
Subdividing Property: Tax Implications
Subdividing a block of land may result in tax obligations, depending on your intentions and activities.
Key considerations include:
- Capital Gains Tax (CGT): If a subdivided portion of your land is sold, CGT may apply—even if the land formed part of your PPR.
- Goods & Services Tax (GST): If land is developed for sale in a commercial capacity, GST may be payable.
- Cost Base Adjustments: The costs associated with subdivision (e.g. surveying, council approvals, legal fees) may be used to adjust your cost base, potentially influencing your CGT outcome.
These matters can vary depending on individual circumstances and the scale of development.
Tax Considerations for Short-Term Rentals (e.g. Airbnb)
Using your property for short-term rentals may have tax implications, particularly if income is earned regularly or the property is advertised on platforms like Airbnb.
Some points to consider:
- Income Reporting: All rental income generally needs to be included in your annual tax return.
- Expense Claims: Expenses such as cleaning, management fees and utilities may be deductible based on the percentage of time the property is rented.
- CGT Impact: Renting your PPR for extended periods may affect CGT exemptions if you later sell the property.
It’s important to keep records of dates, expenses and income earned through short-term rental activity.
Changes to Property Tax in Victoria (2024 Onward)
Recent tax reforms introduced in Victoria may affect some property owners, particularly those with vacant or investment properties:
- Vacant Residential Land Tax (VRLT): Regional areas, including Warrnambool, are now included in this scheme. Properties left unoccupied for more than six months in a calendar year may be subject to additional tax.
- Land Tax Thresholds: Adjustments to land tax may affect those with investment or secondary properties.
- Stamp Duty Reform: The calculation of stamp duty may vary depending on whether the property is an investment or owner-occupied.
Foreign Resident Withholding Tax
If a property is sold by someone living overseas or purchased by a foreign investor, the Foreign Resident Capital Gains Withholding Tax may apply.
- A 12.5% withholding tax is applicable to sales over $750,000.
- The buyer is required to withhold this amount and forward it to the ATO unless a clearance certificate is provided.
This provision is designed to help capture CGT liabilities that may otherwise be unpaid.
Property ownership in Victoria can involve a number of tax considerations—especially when it comes to rental income, subdivisions or sales. Being aware of the general tax implications may support more informed planning and record-keeping.
For guidance specific to your situation, contact Pola & Co in Warrnambool on
(03) 5561 2992 to discuss your property tax and accounting needs.
