Without consultation, the Victorian Government has introduced the State Taxation Acts and Other Acts Amendment Bill 2023 (Bill) which will make a number of significant changes.

Prohibition against adjusting land tax

In a surprising move, the Bill proposes to prevent the adjustment of land tax between vendors and purchasers or from purchaser’s otherwise being obligated to pay the land tax liability of the vendor. This measure is to commence from 1 January 2024. In an incredible (and very disappointing) move, there are no transitional rules or grandfathering for existing contracts.

This has a number of potential consequences. For example, there are existing arrangements, that will settle after 31 December 2023, where the purchaser has agreed to pay all, or an adjustment, of the land tax. For example, long term contracts where developers have purchased land. Effectively, those developer purchasers will get a “free kick” and the vendor’s ultimate sale proceeds will be less than the agreed price.

In any event, where both parties will pay land tax on a property there is no unfairness for apportionment of land tax. Rather, this gives the purchaser an unfair gain where they will take possession of land and not pay land tax that they would otherwise pay under the current adjustment regime.

It is hoped (but not expected) that this measure will either be abandoned, only apply for purchasers who would not otherwise pay land tax and/or have a transitional/grandfather regime for current contracts.

Prohibition against adjusting windfall gains tax (WGT)

This measure is also to apply from 1 January 2024. At least this prohibition only applies to WGT assessments that have been issued. Vendors and purchasers will still be free to adjust future/prospective WGT liabilities before assessments have been issued.

Vacant residential land tax expanded to all Victorian properties

From 1 July 2025, vacant residential land tax (VRLT) will be expanded to cover all Victorian residential properties (currently, it only covers inner suburban Melbourne).

That is, if a residential property is vacant for more than 6 months in the preceding year, it will be subject to VRLT at a rate of 1% on the capital improved value. This is on top of any land tax (and absentee surcharge and council rates etc).

Vacant residential land tax to include unimproved land

From 1 July 2026, VRLT will apply to unimproved residential land that has been unimproved for 5 or more years.

VRLT will not apply to unimproved land that is contiguous with a principal place of residence or is incapable of being used or developed for residential purposes.

Corporate reconstruction concession to be expanded to sub-sales

The corporate reconstruction concession is to be expanded to cover nominations of companies in the same corporate group.

For further information please contact:

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au