The State Taxation Acts and Other Acts Amendment Act 2023 received Royal Assent on 12 December 2023. The new law has changed the law in relation to land tax, windfall gains tax (WGT) and duty.
The changes you need to be aware of now are:
Land tax and windfall gains tax
Contracts for the sale of land where the consideration does not exceed $10 million entered into from 1 January 2024 must not include a provision that requires the purchaser to pay any amount towards land tax or an existing WGT liability. The new law does not apply to contracts that are entered into before 1 January 2024 even if they settle on or after 1 January 2024.
Contracts for the sale of land currently provide that land tax is apportioned between the vendor and purchaser as an adjustment to the purchase price at settlement and the land tax liability is to be paid by the vendor. These contracts will need to be amended if they will not be signed until 1 January 2024.
From 1 January 2024, it is an offence for vendors to sign contracts which apportion land tax or existing WGT liabilities to purchasers and if the contract includes such a provision it will be of no effect. The penalty for this offence is 60 penalty units for individuals (currently $11,538.60) and 300 penalty units for corporations (currently $57,693.00).
Vacant residential land tax (VRLT)
Vacant residential land tax (vrlt) of a minimum of 1% of the capital improved value (CIV) is currently applied to residential properties that have been vacant for an aggregate of six months or more in the previous calendar year (although there are some exemptions) where the property is situated in 16 specific Melbourne local council areas.
The new law has changed this in two key areas:
- VRLT is expanded to apply to allvacant residential land throughout Victoria from 1 January 2025 but is based on occupancy from 1 January 2024 so it effectively starts 1 January 2024. The tax is an ongoing annual tax and will increase if the property is vacant for consecutive years (1% first year, 2% second year and 3% third year) to a maximum of 3% of the capital improved value.
- From 1 January 2026 VRLT will apply to unimproved residential land in specific local council areas in Melbourne that are capable of but have remained undeveloped for 5 years.
13 December 2023