Victorian Property Tax Changes To Be Aware Of

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As 2024 unfolds, Victorian property owners face significant changes to the state’s property tax landscape.

The Victorian government has introduced alterations impacting absentee owners, vacant property holders, and those engaged in various property transactions.

With a surcharge and tax deadline approaching on January 15, 2024, it is crucial for Australians who own one or more properties to be aware of these changes and understand how they might be directly affected.

1. Absentee Ownership Surcharge (AOS) Increase

The Absentee Ownership Surcharge (AOS) has notably increased, climbing to 4% for the 2024 land tax year. This surcharge applies to Victorian land owned by absentee owners. If you currently own property in Victoria but reside elsewhere, this change directly impacts your tax obligations. This surcharge is due on January 15, 2024.

2. Temporary Land Tax Surcharge

Victoria has introduced a temporary land tax surcharge, effective January 1, 2024. This change prevents land tax adjustment between a vendor and purchaser in contracts for land sale. It is important to note that this rule does not apply to contracts entered on or before December 31, 2023, settling on or after January 1, 2024. Breaches may result in prosecution and penalties of up to $11,540 for individuals and $57,700 for corporations.

3. Windfall Gains Tax

From January 1, 2024, a new law prevents the passing on or adjusting a Windfall Gains Tax (WGT) liability upon the subsequent sale of land. This is designed to ensure that WGT liability is factored into the sale price and not treated as an adjustment. Similar penalties apply for breaches.

4. Vacant Residential Land Tax (VRLT) Expansion

The Vacant Residential Land Tax (VRLT) is expanding its reach from limited council areas in inner Melbourne to encompass all land in Victoria. A property is considered ‘vacant’ if it remains unoccupied for six months in the previous year. The tax, ranging from 1% to 3% of Capital Improved Value (CIV), is an annual levy paid in addition to land tax. The rate increases for consecutive vacant years. For example, an empty home with a CIV of $1 million will incur a $10,000 surcharge.

Effective January 1, 2025, VRLT will apply statewide. Subject to specific conditions, Exemptions may apply for holiday homes. Consider these exemptions carefully before being caught by the 15 January deadline.

5. Unimproved Residential Land and Exemptions

From January 1, 2026, VRLT will extend to unimproved residential land in specific council areas of Melbourne that have remained undeveloped for five years. Exemptions will apply to land contiguous to a principal place of residence and land incapable of residential use or development.

6. Holiday Home Exemption Modification

The VRLT holiday home exemption, effective January 1, 2025, can now be satisfied by a relative of the owner or vested beneficiary who uses and occupies the property for at least four weeks in a calendar year.

7. New Residential Premises Exemption Extension

From January 1, 2025, the exemption for land becoming residential during the calendar year will extend to a maximum of three years, provided the owner has made genuine efforts to sell the land. If the property remains unoccupied and unsold after this period, VRLT at 1% will apply until sold.

8. Build-to-Rent (BTR) Special Land Tax

Given the surge in Build-to-Rent developments, the Land Tax Act 2005 has been amended to align the BTR land tax formula with current rates and the absentee owner surcharge. Developers in this space should seek advice to understand the impact on their projects.

9. Single Holding Land Tax Concession

Owners of charitable, municipal, and public land and nominated PPR beneficiaries of unit trust schemes and discretionary trusts are clarified not to pay the fixed lump sum component of the COVID-19 debt temporary land tax surcharge more than once, starting from the 2024 land tax year.

In conclusion, these changes underscore the need for property owners to review their holdings and tax obligations.

Stay informed and secure your property investments as you navigate these changes.

Contact us to ensure compliance and mitigate potential financial implications in this evolving tax landscape. You can email us at admin@rispin.au or call 03 9674 3680.

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