The State Taxation Acts and Other Acts Amendments Bill 2023 introduced to Parliament

The State Taxation Acts and Other Acts Amendments Bill 2023 (Bill) was introduced to Parliament on 3 October 2023.

The Bill proposes a number of reforms to Victoria's land tax and is expected to pass this year.

Some of the key changes are highlighted below.

Prohibiting land tax and windfall gains tax adjustments

The Bill proposes amendments to the Sale of Land Act 1962 (Vic) by prohibiting parties under a contract of sale from adjusting land tax from 1 January 2024.

The same measure will also apply to prevent a party who is subject to a current assessment to pay windfall gains tax (WGT) from apportioning or passing on that liability between itself and a purchaser under a contract of sale.

Surprisingly no transitional arrangements have been proposed by the Bill.

Penalties apply for non-compliance.

Expansion of vacant residential land tax  

The Bill proposes that vacant residential land tax will be expended as follows:

• From 1 July 2025 the vacant residential land tax (VLRT) (that is a tax of 1% on capital improved value levied on properties which are vacant for more than six months in the preceding year) will be expanded to all vacant residential land in Victoria.
• From 1 July 2026 VLRT will apply to any residential land that has been unimproved for five or more years in established areas of Melbourne.

Exemptions apply to the above, such as land that is contiguous with a principal place of residence solely used for private benefit and enjoyment of the owner of the principal place of residence and land that cannot be used for residential purposes.

Increase to build-to-rent special land tax rates

The Bill proposes a new set of increased rates for the calculation of build-to-rent (BTR) special land tax rates under s 50B of the Land Tax Act 2005, the majority of which impact absentee landowners of land used for BTR.

Impacts

If passed:

1. Landowners who have currently entered into contracts of sale with settlement dates in 2024 and beyond will be unable to adjust land tax, or WGT. This may be result in a significant financial impact to landowners.
2. The prohibition to adjusting general land tax may also result in vendors increasing their price expectations to account for the inability to adjust land tax liability.
3. Owners of vacant residential land will need to be aware of the expanded application of the VLRT and associated concessions.
4. Owners of residential land that remains unimproved will need to consider the expanded application of the VLRT and associated concessions.
5. Owners of BTR land will need to factor in increases to the BTR special land tax rates.

If you have any questions in relation to the above changes and how they may impact you, please contact Calvin Tay.