News & Insights

On December 12 2023, the State Taxation Acts and Other Acts Amendment Act 2023 (the Bill) received Royal Assent, with many of the changes to take effect on 1 January 2024.

Prohibitions to Adjustment of land tax or existing windfall gains tax (WGT)

The Bill prohibits:

• the adjustment of land tax between vendors and purchasers in contracts of sale of land, except for high value land contract transactions of $10 million or greater; and
• WGT from being passed on to a purchaser under a contract of sale or option agreement if the contract of option agreement was entered into after the WGT liability has been assessed.

These amendments apply to contracts or option agreements in Victoria signed on or after 1 January 2024.

Victoria’s Attorney General, Jaclyn Symes, has stated the rationale behind the amendments is:

“…the apportioned land tax is not directly reflected in the purchase price, and often results in land tax being passed on to purchasers who are subject to little or no actual land tax liability once the property has been transferred.”

Contracts already prepared in anticipation of the sale of properties which are unsold by 1 January 2024 may need to be updated to ensure they comply with the Bill. The current standard general conditions in the vast majority of Victorian sale contracts which have long been adopted, can no longer be relied upon and should be checked prior to signing a contract after 1 January 2024.

It will be an offence for a vendor to include a clause in a contract which purports to make an adjustment for land tax (excluding transactions over $10million) or existing WGT liabilities in breach of the Bill. For an individual, the penalty for the offence is set to a maximum of 60 penalty units (or $11,538.60), or for a company a maximum penalty of 300 penalty units (or $57,693.00).

Expansion of Victoria’s vacant residential land tax regime

From 1 January 2025, Vacant Residential Land Tax (VRT) is expanded such that it will apply throughout all of Victoria. Previously VRT only applied to properties in the council areas of: Banyule, Bayside, Boroondara, Darebin, Glen Eira, Hobsons Bay, Manningham, Maribyrnong, Melbourne, Merri-bek (formerly Moreland), Monash, Moonee Valley, Port Phillip, Stonnington, Whitehorse and Yarra.

VRT will be extended to apply to undeveloped Victorian land, that has been undeveloped for 5 years or longer. The undeveloped land may be liable to the VRT if the land satisfies the following 3 criteria for a continuous period of 5 or more years:

1. The land is located in any of the following council areas of metropolitan Melbourne Banyule, Bayside, Boroondara, Brimbank, Cardinia, Casey, Greater Dandenong, Darebin, Frankston, Glen Eira, Hobsons Bay, Hume, Kingston, Knox, Manningham, Maribyrnong, Maroondah, Melbourne, Melton, Merri-bek (formerly Moreland), Monash, Moonee Valley, Mornington Peninsula, Nillumbik, Port Phillip, Stonnington, Whitehorse, Whittlesea, Wyndham, Yarra and Yarra Ranges;
2. The land is not in a specified non-residential zone; and
3. The land is ‘not solely or primarily used for or under development for a non-residential use’.

The existing exemptions to the VRT will generally continue to apply, however there will be further exemptions introduced as of 1 January 2026. These exemptions will include exemptions for holiday homes, property used as a base for purposes of business or employment, some contiguous land and land that cannot be used or developed for residential purposes.

There is a significant limitation on the holiday home exemption where land is held by a company or a discretionary trust, it will not be eligible for the holiday home exemption.

Land Tax is imposed on site value (or unimproved value of the land). VRT is imposed on capital improved value of the land at the rate of 1%. VRT is charged in addition to standard land tax.

Amendments to Valuation of Land Act 1960 (Vic)

Further changes proposed by the Bill include changes to the calculation of ‘capital improved value’ (CIV).

The Bill inserts an additional layer of calculation of the CIV, to now include the value of any ‘fixtures’ on the land. As a result, valuations for rating, fire services levy, VRLT and WGT will be affected.

Stamp duty amendments to corporate reconstruction and consolidation concession in the Duties Act 2000 (Vic)

Under the Duties Act 2000, corporate reconstruction relief can be obtained in respect of the duty that would otherwise be charged on transactions that are between members of the same 90% or more owned and controlled corporate group. Such relief usually results in a 90% discount to the duty that would otherwise be payable. The Bill proposes to expand the corporate reconstruction regime to cover ‘sub sales’ or nominations between corporate group members.

Need to discuss further?

The Property team at Macpherson Kelley keeps up to date with changes and proposed changes to property tax law and its implications. If you need guidance navigating the complexities, or need assistance with any other property related matters, reach out to our team for advice.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.