Proposed Changes which will impact Property Tax Laws in Victoria
The State Taxation Acts and Other Acts Amendment Bill 2023 was introduced into Victorian Parliament on 3 October 2023. If passed, this will result in significant changes to Victorian Tax Laws.
The key proposed changes are summarised as follows:
- Land Tax and Existing Windfall Gains Tax: Currently, contracts for the sale of land provide that land tax liability is to be adjusted at settlement i.e./ the vendor is generally liable for land tax for the year of the sale apportioned to the settlement date and the purchaser generally pays the remainder (this occurs with other adjustments like council rates, water etc). The proposed change will mean a vendor is prohibited from recovering land tax and existing WGT liabilities (assessed on or before the contact date) from a purchaser as of 1 January 2024. It should be noted that a contract with such provisions will mean the provision is void and penalty provisions apply.
- Expanding Victoria’s vacant residential land tax regime: this tax was introduced from 1 January 2018 and meant homes in inner and middle Melbourne that were left vacant for more than 6 months in the preceding calendar year would be subject to a tax equivalent to 1% of the property’s capital improved value. The proposal is to:
- extend the tax to all vacant residential land throughout Victoria from 1 January 2025, but the period to determine a developed property’s vacancy will generally start on 1 January 2024.
- Extend the tax to include certain unimproved land (generally land which has been unimproved for 5 years or more) in Metropolitan Melbourne from 1 January 2026.
- Changes to how capital improved value is to be calculated for valuation purposes: the proposal is to include a definition of “fixtures” in the relevant legislation and the value of fixtures to be included in determining the capital improved value of land. This will as a result impact directly on valuations for rates, the fire services levy, WGT and vacant residential land tax effective from 1 January 2024.
- Duty Amendments to offer relief for sub-sale transactions within a corporate group: the sub-sale provisions within Victoria generally apply and impose double duty where an entity enters into a contract or option and another person/entity ultimately takes transfer of the property (usually via a nomination) in circumstances where land development has occurred, or additional consideration is provided. Overall, this means duty is imposed twice when the transfer occurs. This new proposal changes the relevant legislation to extend the corporate reconstruction and consolidation concession (which usually results in a 90% discount to duty otherwise payable) to apply to sub-sale transactions between members of the same corporate group as defined under the Act. The changes are proposed to take effect from the day after the Bill receives Royal Assent.
Please note that these changes, as well as some others are yet to receive Royal Assent so are not law yet. We will keep you updated as to the status of this bill in the coming weeks/months. Please also note that the above is a summary of the proposed changes only. For further information, please feel free to contact us on (03) 9942 7790 or email our Principal Lawyer, Nick Karolidis at nick@karolidis.com.au.