Snapshot of Major Victorian Property Tax Changes effective from 1 January 2024

The State Taxation Acts and Other Acts Amendment Act 2023 received Royal Assent on 12 December 2023. The new law introduces significant property tax changes in Victoria with effect from 1 January 2024. LPLC published an Alert about the proposed changes in October 2023. Since then, some further changes have been made. Below is some key information that practitioners should be aware of in respect to land tax, windfall gains tax and vacant residential land tax (and act on) now. A more comprehensive summary of the changes will follow in early 2024.

• The new law prevents the adjustment of land tax between a vendor and purchaser in contracts for the sale of land from 1 January 2024.
• A change to the original Bill confirms it does not apply to contracts entered on or before 31 December 2023, that settle on or after 1 January 2024.
• It does not apply to contracts where the consideration exceeds $10 million (to be indexed).
• An adjustment clause will be unenforceable (unless the transitional provisions apply).
• Prosecution and potential penalties can apply (currently $11,540 for individuals and $57,5700 for corporations) for breaches of the new law.

• From 1 January 2024 the new law prevents the passing on or adjustment of a windfall gains tax (‘WGT’) liability, that has been assessed, on the subsequent sale of that land.
• The intention is that WGT liability, once assessed, will be reflected in the sale price, and not dealt with as an adjustment.
• Prosecution and potential penalties can apply (currently $11,540 for individuals and $57,700 for corporations) for breaches of the new law.
• These changes do not apply to contracts (and compliant options) entered on or before 31 December 2023, that settle on or after 1 January 2024.

• VRLT is expanded from existing limited council areas in inner Melbourne to all land in Victoria.
• In general terms a property is ‘vacant’ if it has not been occupied for 6 months in the previous year.
• There are some exemptions that may apply such as a holiday home, but conditions apply for all exemptions.
• Properties that are ‘vacant’ (basically not occupied for 6 months in the previous year) will be taxed a minimum of 1% and up to 3% of the CIV (Capital Improved Value, not the land value).
• It is an ongoing annual tax and paid in addition to land tax.
• The rate of tax will increase if the property is vacant for consecutive years (1% first year, 2% second year and 3% third year) to a maximum of 3%.
• The new tax starts 1 January 2025, but is based on occupancy from 1 January 2024, so effectively starts 1 January 2024.

• From 1 January 2026 the VRLT will apply to unimproved residential land in Melbourne (specific local council areas) that are capable of but have remained undeveloped for 5 years.
• The intention is that land capable of development cannot sit vacant without attracting the VRLT.

Firms and practitioners will need to:

• carefully read the legislation. There are a number of other amendments which practitioners also need to be across and understand
• update precedents, checklists, advice letters and procedures now
• inform staff about the changes
• be aware of the potentially different result for land tax adjustment between a contract of sale of land entered on or before 31 December 2023 (settling after 1 January 2024), and a contract entered after that date

Subscribe to updates from the State Revenue Office on these changes. On 12 December 2023 the SRO published a high-level summary ‘Changes to state taxes December 2023.’