Update: Summary of State Taxation Acts and Other Acts Amendment Act 2023

On 12 December 2023, legislation making important amendments to Victorian tax laws received Royal Assent.

Below is a summary of some of the amendments which are most likely to impact property owners, vendors and purchasers.

  • No Adjustment of Land Tax

If a sale of land contract is made on or after 1 January 2024, the contract must not require the purchaser to pay (or reimburse to the vendor) any land tax assessed against the vendor.

Land tax cannot be adjusted between the vendor and purchaser at settlement.

Even if a settlement occurs in (say) January in a year, the vendor must pay all the land tax for that calendar year and cannot recover any of it from the purchaser.

There is an exception if the sale price is at or above the “threshold”. In 2024, the threshold will be $10 Million. Thereafter, the threshold will increase annually by CPI.

The vendor can be fined for including a land tax adjustment clause in its contract.

  • Holiday Homes Exemption to Vacant Residential Land Tax

From 1 January 2025, the Vacant Residential Land Tax (VRT) will apply to vacant residential land in regional Victoria.

There is an exemption for holiday homes – but there are certain criteria that must be met in 2024 to qualify for the exemption in 2025.

This exemption almost certainly does not apply to holiday homes owned by family trusts, companies or SMSFs.

If you do own a holiday home, we suggest that you contact our office to discuss qualifying for the VRT exemption, including any restructuring required if the home is owned by your family trust, company or SMSF.

  • No Passing on of Existing Liability for Windfall Gains Tax

If a sale of land contract (or an option to buy/sell land) is made on or after 1 January 2024, the contract (or option) must not require the purchaser to pay any part of any existing liability for Windfall Gains Tax (WGT).

There is an exception for a contract made on or after 1 January 2024 due to the exercise of an option which was granted before that date.

The vendor can be fined for including a clause passing on the existing liability for WGT in the contract (or option).

  • Temporary Covid-19 Debt Surcharge (on some land held on a single holding basis)

Some of you may find that your land tax bills for next year have been increased because of a temporary “Covid-19 Debt” surcharge.

The temporary surcharge will apply from 2024 to 2033.

  • Government CIVs & Fixtures

Some of you may find that your land tax and/or council rates bills increase significantly next year because the Government has significantly increased the Capital Improved Value of your land.

This increase may be because the Government can now take fixtures to the land into account when valuing the land (even if the fixtures are owned by a tenant of your property).

  • Unimproved “Mixed Use” Land that is Left Unimproved for 5 Years or Longer

From 1 January 2026, if land could be used for a non-residential use or for a residential use but has been left unimproved for 5 years or longer, then the VRT will apply to the land.

There is an exception if the owner can persuade the SRO that it intends to use or develop the land for a non-residential use and has an acceptable reason for the delay in using or developing the land.

The above is only a summary of some of the changes to these property tax laws.

If you have any further queries as to how these changes may impact your situation, please contact our office to discuss.

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content

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