Complex changes to Victorian Land Tax 2024

Finance Feb 8, 2024

4 min read

land tax
land tax

The landscape of land taxation in Victoria has undergone significant transformations over the last couple of months, making it imperative for property owners to stay informed about the latest updates. In this blog post, we provide a summary overview of Victorian land tax changes, shedding light on surcharges, and exceptions that apply based on individual circumstances.

Understanding the Variable Rates and Surcharges

Calculating land tax in Victoria is no simple task, given the multitude of variable rates and surcharges. One notable surcharge applies to absentee owners – individuals living outside Australia or who were absent on December 31st. Additionally, land that remains undeveloped for more than five years is subject to an extra surcharge, further adding to the complexity of the tax system.

If you own property in a trust, you may also expect to see a surcharge on your land tax bill this year as the government introduces an additional fee here too. Joint ownership is also assessed both collectively and individually, ensuring that all parties fulfill their land tax obligations accurately. This dual assessment aims to strike a balance, preventing both oversights and overpayments.

Exceptional Cases

While land tax casts a wide net, there are exceptions for certain property types. Primary production land, community housing, charities, boarding housing, and properties on crown land enjoy exemptions from land tax. This nuanced approach acknowledges the diverse nature of land ownership and usage and is designed to incentivise those are not seeking personal gain.

Thresholds for Land Tax

The biggest change in Victoria which serves to separate this state from all the rest, is that land tax kicks in once the land value reaches $50,000. In NSW, land tax isn’t payable until the unimproved land value hits $1.075M – a really sizeable difference when contrasted with Victoria.

It’s important to note that land tax is also payable on any property owned that is not a principal place of residence (PPR). This means it applies to investment property but also to holiday homes or second residences. And to add insult to injury, a vacant land tax applies to properties which were vacant for >6 months across the year, designed to disincentivise homeowners from leaving property uninhabited however this is applicable in certain suburbs and not across all of Melbourne. You can view the suburb list here.

Changes in Vendor Responsibilities

One significant change in the recent amendments involves the apportionment of land tax. Vendors can no longer shift the responsibility of outstanding land tax liabilities to buyers. Before settlement, all outstanding land tax must be settled by the vendor, or they risk facing a hefty penalty of up to $60,000 for non-compliance. This shift aims to streamline the settlement process and ensure that all tax obligations are addressed before the transfer of ownership without the burden being felt by the buyer.

As the Victorian land tax landscape undergoes changes, property owners must navigate through the intricacies of variable rates, surcharges, and exemptions. Staying informed about the latest updates is crucial to avoiding penalties and ensuring compliance with the evolving taxation framework. Whether you are a sole property owner, part of a joint ownership arrangement, or hold land in trust, understanding the nuances of Victorian land tax changes is key to managing your tax obligations effectively.

Engage your professionals

We’d strongly recommend speaking with a property lawyer ahead of making any new purchases, and indeed to review your current investment portfolio, as these changes to land tax have now made Victoria one of the most expensive states to own an investment property in.

Entourage’s Finance and Property teams work closely with investors and their professionals alike to ensure appropriate structures are used, along with providing guidance on property acquisitions and credit applications.

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