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New Year, New Tax: Amendments to Victorian State Taxes announced for the coming years

Written by Tiffany Yeo, Graduate Lawyer under Principal Supervision

The State Taxation Acts and Other Acts Amendment Bill 2023 (“Bill”) received Royal Assent on 12 December 2023 amending various Acts, including the Property Law Act 1958, the Sale of Land Act 1962 and the Land Tax Act 2005.[1]

Adjusting for Windfall Gains Tax and Land Tax is now prohibited

Prior to these amendments, a Vendor could recover windfall gains tax and adjust land tax where applicable, pursuant to a Contract of Sale. This meant that a Purchaser could be liable to pay all of the Vendor’s windfall gains tax and all or a portion of the Vendor’s Land Tax.

However, for Contracts of Sales entered into after 1 January 2024, Vendor’s will no longer be permitted to pass these liabilities onto Purchaser’s (except where the transaction is $10 million or over). It will be illegal!

The maximum penalty for purporting to pass on these liabilities to the Purchaser, as at the date of this article, is 60 penalty units (or $11,538.60) for an individual and 300 penalty units (or $57,693.00) for a body corporate.

Vacant Residential Land Tax

From 1 January 2025, Vacant Residential Land Tax will begin to apply to residential land across Victoria that has been vacant for more than 6 months in the last calendar year.

A progressive rate of this new tax will apply based on the number of consecutive tax years the land has been liable for the tax. This will be 1% of the capital improved value of the land for the first year, 2% of the capital improved value of the land for the second consecutive year and 3% of the capital improved value of the land for the third consecutive year.

Exemptions will apply for new residential premises for a period of 3 years provided that the owner has made genuine efforts to sell the land. After this period, a rate of 1% will apply until it is sold.

Exemptions will also apply for holiday homes that are used or occupied for at least 4 weeks in the year preceding the tax year by a relative of the owner or vested beneficiary who also has a principal place of residence in Australia.

The Meaning of Capital Improved Value

Further, amendments to the Valuation of Land Act 1960 now means that capital improved value includes items affixed to the land whether or not you own those items or are considered fixtures at law.

What does this mean?

Vendors and owners of residential properties should engage experienced conveyancers and lawyers before selling or purchasing a property to ensure they receive up to date advice on their rights and obligations and ensure they do not incur hefty penalties for failing to comply with these changes.

Contact our experienced conveyancing team and lawyers to handle your conveyancing matters, whether it be the drafting of your Contracts of Sale and Section 32 Statements or reviewing and advising you on them before purchasing a property.

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