The landscape of taxation laws underwent a significant transformation in Victoria, Australia recently with the enactment of the State Taxation Acts and Other Acts Amendment Act 2023 on December 12, 2023. The new law introduces significant property tax changes in Victoria with effect from January 1, 2024.
If you are planning to acquire land in Victoria in 2024, it’s important to be aware of several significant changes. However, it is important to note that properties traditionally exempt from land tax, for example, your primary residence, will continue to enjoy this status under the new system.
Some of The Key Changes Include
Corporate Reconstruction Concession
When we transfer dutiable property like land from one entity to another, it generally incurs duty. Previously, the Corporate Reconstruction Concession (CRC) has been pivotal in reducing duty to 10% where the transfer is between members of the same corporate group. However, following the recent amendment, the CRC encompasses “sub-sale” transactions within the corporate domain. Double duty will be levied when the eventual transferee is different from the initial purchaser, especially after additional consideration or when property development occurs.
To avoid double duty, it’s advisable to designate the intended owner upfront or promptly nominate them in contracts.
Stamp Duty Revamps
Stamp duty, a pivotal facet of land acquisition costs, has undergone substantial changes aimed at reducing the financial load for buyers. Stamp Duty on commercial and industrial properties will be replaced with an annual property tax from July 1, 2024.
Prohibition of the windfall gains tax (WGT) and Land Tax Apportioning
Other significant changes include prohibitions and penalties, for adjustments of land tax and existing WGT liabilities against purchasers in Victoria. Before this new amendment, typically vendor used to pay the land tax liability apportioned to the period leading up to the settlement and the purchaser will be responsible for the land tax remainder paid for that year. Effective from January 1, 2024, it will be illegal for vendors to include clauses in contracts that attempt to enforce the purchasers to apportion land tax or existing WGT. The changes aim at protecting purchasers from any unjust land tax burdens and help within the property market.
Vacant residential land tax (VRLT)
Another significant change to the taxation laws is to the VRLT, which will apply to all vacant residential land (dwellings) in Victoria on and after January 1, 2025 if the land is vacant for more than six months in the preceding calendar year. The new rates will apply as follows:
- 1% of the capital improved value (CIV) of taxable land for the first year the land is liable for VRLT where the land was not liable for VRLT in the preceding tax year;
- 2% of the CIV of the land where the land is liable for VRLT for a second consecutive year; and
- 3% of the CIV of the land where the land is liable for VRLT for a third consecutive year.
Cost Implications and Risks
With the recent changes, the inability to adjust for land tax or WGT starting from January 1, 2024, will carry significant cost implications for property owners. There will be the risk of penalty if land prices are raised to allow vendors to absorb some of the WGT costs.
The extension of the VRLT regime is substantial and will introduce an annual levy, alongside land tax, for any vacant land.
Disclaimer: Kindly be advised that the content presented in this article is intended for informational purposes only and should not be construed as professional counsel. It is recommended to seek guidance from a qualified professional to grasp the potential impact of the 2024 Victorian Land Tax amendments on your unique financial circumstances. If you need any additional assistance, please don’t hesitate to contact our expert licensed conveyancer Shaniya Xureb from Credit Hub Australia at 1300 782 944 or contact us at info@credithub.com.au