The tax slug awaiting Victorians running a business from home

Victoria’s tax office is hunting down those who run small businesses and side hustles from home to slug them with land tax bills to help plug Victoria’s towering debt.

Victorians who run small businesses and side hustles from their home are being slugged land tax on their primary place of residence.

The state’s tax office is hunting down people working from home to help plug Victoria’s towering debt – set to hit $187bn by 2027 – before the May budget.

The state government lowered the land tax threshold in 2023 from properties worth $300,000 to just $50,000, capturing an extra 380,000 Victorians.

The wider net means more Victorians running a side hustle and small businesses from a room within their family home, as well as garage or shed, could cop the tax.

A hairdresser who converts their garage into a hair salon is one example of someone who could cop the tax.

Examples provided by the State Revenue Office include a hairdresser who converts their garage into a hair salon, a web designer who uses one room exclusively for business activities, or a homeowner who grants a lease or licence to another person to store records or other business-related materials.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra called on the state government to review the sneaky clause, warning Victorians that operating businesses from their homes could “leave them with a future tax problem”.

“The concern here is that the application of land tax rules to home-based businesses could create unintended financial burdens for ‘side hustlers’ trying to get their ventures off the ground,” he said.

“The Act was put in place nearly 20 years ago … our work style has changed significantly, and the Act needs to be updated to reflect this.”

Victorian Chamber of Commerce and Industry chief executive Paul Guerra is calling on the Allan government to review the sneaky clause. Picture: Jake Nowakowski

Mr Guerra added that the ruling “risks stifling the very innovation and enterprise that drives our economy forward”.

“Many entrepreneurs start from home, often in a spare room or garage long before they have the resources to rent commercial space,” he said.

The SRO uses AI data-matching techniques with other government agencies to detect and bill Victorians with home-run businesses under the regime.

Opposition treasury spokesman James Newbury said by lowering the land tax thresholds, the state government has “found another sneaky way to attack Victorians”.

“This time it’s on the family home,” he said.

“It’s just unAustralian of Jacinta Allan to be knocking on front doors, asking is people have a side business, and rattling her empty tin can, because she has run out of money.”

Opposition treasury spokesman James Newbury ... Picture: David Caird

Rooms, garages and sheds used for business purposes are only captured under the land tax system if their value – calculated by the size and the value of the home – is worth more than $50,000.

However, for homeowners with a second property, the value of the space is combined with the value of the investment or commercial, or holiday home, pushing up land tax bills even further.

It only applies to Victorians making more than $30,000 per year in gross income from their home business.

A government claimed that land tax “does not apply to homeowners or renters” but conceded that homeowners who run businesses from their primary place of residence were being hit “to make sure that land tax is applied fairly”.

Originally published as The tax slug awaiting Victorians running a business from home