The State Taxation Acts and Other Acts Amendment Act 2023 received Royal Assent on 12 December 2023. The Act introduces changes to several Acts, and includes changes to vacant residential land tax, and prohibitions on land tax and windfall gains tax apportionment as part of contracts and agreements.
Vacant residential land tax (VRLT)
From 1 January 2025, VRLT will apply to residential land across all of Victoria if the land is vacant for more than 6 months in the preceding calendar year.
From 1 January 2025, a new progressive rate of VRLT will apply to non-exempt vacant residential land across all of Victoria based on the number of consecutive tax years the land has been liable for VRLT:
- 1% of the capital improved value of the land for the first year the land is liable for VRLT where the land was not liable for VRLT in the preceding tax year
- 2% of the capital improved value of the land where the land is liable for VRLT for a second consecutive year
- 3% of the capital improved value of the land where the land is liable for VRLT for a third consecutive year.
From 1 January 2026, VRLT will apply to all unimproved residential land in metropolitan Melbourne that has remained undeveloped for at least 5 years and is capable of residential development. New VRLT exemptions will be introduced for:
- unimproved residential land that is contiguous to a principal place of residence (PPR)
- unimproved land incapable of being used or developed for residential purposes.
From 1 January 2025, the VRLT holiday home exemption will be amended to enable the usage and occupancy requirement to be satisfied by a relative of the owner or vested beneficiary.
From 1 January 2025, the VRLT exemption for new residential premises will be extended to allow a maximum exemption period of 3 years, provided the owner has made genuine and reasonable efforts to sell the land. If the property continues to be unoccupied and unsold after this time, the land will be liable for VRLT at the rate of 1% until sold. Every 12 months, the Commissioner of State Revenue will be required to report on the number of properties which have received the new residential premises exemption or concession as well as the amount of VRLT revenue that was foregone, or likely to be foregone, as a result of the exemption or concession.
Land tax and windfall gains tax apportionment
The Sale of Land Act 1962 and Property Law Act 1958 will be amended from 1 January 2024 to prohibit land tax apportionment between a vendor and purchaser under a contract of sale of land, except for high-value property transactions ($10 million or greater), and prohibit windfall gains tax from being passed on to a purchaser under a contract or option agreement entered into after the windfall gains tax liability has been assessed.
It will be an offence for a vendor to enter into a contract of sale of land that purports to require the purchaser to pay an amount for or towards the vendor's land tax or known windfall gains tax liabilities.
These amendments do not impact contracts of sale of land entered into before 1 January 2024 (or, for windfall gains tax, options to enter into a contract of sale of land granted before 1 January 2024).
Build-to-rent (BTR) special land tax
The Land Tax Act 2005 has been amended to ensure the BTR special land tax formula correctly reflects the land tax rates and the absentee owner surcharge rate.
Single holding land tax concession
The Land Tax Act 2005 has been amended to ensure that owners of charitable, municipal, public land and nominated PPR beneficiaries of unit trust schemes and discretionary trusts are not required to pay the fixed lump sum component of the COVID-19 debt temporary land tax surcharge more than once (i.e. once for each property). These changes will take effect from the commencement of the surcharge in the 2024 land tax year.
Foreign purchaser additional duty and absentee owner surcharge exemption reporting
The Duties Act 2000 and Land Tax Act 2005 have been amended to require the foreign purchaser additional duty exemption and absentee owner surcharge exemption reports to be tabled in Parliament in every 12 months, rather than every 6 months.
Pensioner and concession card holder duty reduction
The Duties Act 2000 has been amended to ensure key eligibility requirements of the recently reformed pensioner and concession card duty reduction scheme apply to all transferees to a property transaction.
Additionally, the First Home Owner Grant and Home Buyer Schemes Act 2000 has been updated to correct references in that Act to the new pensioner and concession card duty reduction provisions of the Duties Act 2000.
Corporate reconstruction and consolidation concessions
The Duties Act 2000 has been amended to:
- enable the corporate reconstruction concession to apply to sub-sale arrangements where property is being transferred between members of the same corporate group
- prevent the public landholder duty concession from applying in conjunction with certain other concessions to reduce the concessional duty chargeable below 10% of the full duty
- clarify the timing of the 30-day period in which multiple eligible transactions may occur to be part of the same arrangement for the purposes of the corporate reconstruction concession.
Windfall gains tax
The Windfall Gains Tax Act 2021 has been amended to:
- broaden the exemption for rezoning errors to cover any rezoning which corrects a planning error under the Planning and Environment Act 1987
- clarify the definition of ‘excluded rezoning’ as it applies to land that is in the growth areas infrastructure contribution (GAIC) area
- clarify the operation of the waiver for charitable land where only part of the land is used for charitable purposes.
Valuations of land – capital improved value
The definition of capital improved value in the Valuation of Land Act 1960 has been amended to ensure that all items affixed to land are included in the assessment of capital improved value, regardless of who owns the items and whether they are considered fixtures at law.
Fire services property levy
The Fire Services Property Levy Act 2012 has been amended to move various Australian Valuation Property Classification Codes (AVPCCs), including Hydroelectricity, Wind Farm Electricity and Solar Electricity Generation from the ‘Industrial’ to the ‘Public Benefit’ land use classification.
Statute law revision
The State Taxation Acts and Other Acts Amendment Act 2023 has made a statute law revision in the Treasury Corporation of Victoria Act 1992, by correcting a reference to the title of the Transport Integration Act 2010.
