Victoria’s New Land Tax Hits Home Businesses

More than 400,000 Victorians running small businesses from home are facing unexpected land tax bills as the state government lowers the tax threshold. The changes, aimed at reducing government debt, now affect Airbnb hosts, online sellers and professionals using home offices, potentially increasing financial strain on homeowners.

Previously, owner-occupied homes were exempt from land tax if business earnings stayed below $30,000, and the portion of land used for business was valued under $300,000. However, from 2024, the property value threshold has dropped to $50,000, significantly expanding the number of homes liable for tax.

With rising property prices and more people working remotely, home-based businesses are more common than ever. Under the new rules, if an unimproved property is worth $1 million and business activities use 10% of the land, owners now face a minimum yearly tax of $975, whereas they were previously exempt. For those with multiple properties, the tax rate climbs to 2.65%.

This shift is being felt across a wide range of businesses, from Airbnb rentals to e-commerce stores on platforms like eBay and Shopify. Many home-based entrepreneurs are receiving tax audits dating back 5 years, leading to unexpected financial pressures. Some critics argue the move is a last-ditch attempt to boost state revenue as government debt is projected to hit $188 billion by 2028.

Beyond land tax, short-stay rental platforms such as Airbnb now face an additional 7.5% levy from January 2025, though primary residences are exempt. Many believe these tax changes could discourage small business growth and innovation, forcing some homeowners to sell or relocate.

Source: Australian Financial Review, SRO, ABL