Australia: Changes in new taxation laws including vacant residential land tax (Victoria)

Victoria’s new State Taxation Acts and Other Acts Amendment Bill 2023 on 30 November 2023 passed both Houses of State Parliament with several amendments. Read TaxNewsFlash

The bill—as passed—introduces additional measures concerning the vacant residential land tax, including clarification on the position for property developers and the treatment of newly constructed dwellings. The bill also includes a maximum transaction value for the prohibition of apportionment of land tax (and assessed windfall gains tax) to apply.

The updated changes include:

• Increasing the vacant residential land tax rate from 1% in the first year of a residential property being vacant, to 2% in the second year, and 3% in the third year. The rate escalation will only apply on vacant dwellings, not on vacant land. The rate increase will not apply to developers of new housing, and any vacant residential land tax on new homes will not exceed 1%.
• Exempting all holiday homes from the expanded vacant residential land tax provided the holiday home is used and occupied by owners for a period of at least four weeks (can be continuous or in aggregate), with the occupancy requirement extended to include immediate family members. The exemption also applies to properties held in a trust or company when the changes were made public, however these changes were not included in the passed bill due to drafting complexities.
• Exempting newly built dwellings from vacant residential land tax for three years (currently two years) if owners can show they made genuine attempts to sell the property at or below the price they expected when construction began. After that point, the vacant residential land tax would be calculated at a rate of 1% each year until the property is sold, thereby excluding developers from the escalated rate regime. 

From 1 January 2024 the Property Law Act 1958 and Sale of Land Act 1962 will prohibit land tax payable from being subject to apportionment between the vendor and the purchaser for contracts of sale of land that convey property having a value below the threshold amount of $10 million*.

The bill clarifies that contracts of sale of land entered into before 1 January 2024, including options to enter contracts of sale granted before 1 January 2024 (but the option is exercised and contract entered into on or after 1 January 2024), are exempted from the apportionment prohibition.

After feedback from renewable energy industry participants, there was concern regarding an increase in the proposed higher annual fire services levy charges that would occur under an accompanying amendment to the Valuation of Land Act.

The bill now provides that properties providing for wind, solar and battery generation will be levied at the public benefit rate, rather than the higher industrial rate.