New State Taxation Acts and Other Acts Amendments Bill 2023What You Need to Know
The new State Taxation Acts and Other Acts Amendments Bill 2023 (Bill), which was introduced to Parliament on 3 October 2023, proposes a number of reforms to Victoria's taxation laws. Some of the key changes include:
- Expanding vacant residential land tax (VTR) to all vacant residential land in Victoria from the 2025 tax year: The intent of these changes is to ensure that all vacant residential land in Victoria will attract VTR so that, if passed, the current limit in application of VTR to land within a specific geographic location will be removed. There are some concessions contemplated in the Bill, which will need to be consider having regard to the particular circumstances of a property. The Bill also expands the definition of vacant residential land to include residential land that has been unimproved for 5 years or more in established areas of Melbourne from the 2026 tax year.
- Prohibiting land tax & windfall gains tax (WGT) apportionment between a vendor and purchaser under a contract of sale of land from January 2024: The Bill contemplates that there will be a penalty applied where vendors enter into contracts requiring purchasers to pay any portion of the land tax or WGT liability. If passed, this means that from 1 January 2024, a vendor will be responsible for paying:
- all land tax up to the date of settlement, regardless of when land tax for its ownership period is assessed; and
- any WGT assessed, presumably during the period of ownership.
- Changing the frequency of some reporting requirements, including foreign purchaser additional duty exemption reporting and absentee owner surcharge exemption reporting (from 6 months to 12 months): This will reduce some administrative burden on taxpayers.
- Changing the special land tax rates for Build to Rent (BTR): A new set of rates for the calculation of BTR special land tax rates will apply from 2024 with the bulk of the increase impacting absentee owners.
The Bill is currently before the Victorian Parliament and is expected to be passed later this year.
What does this mean for you?
Owners of vacant residential land will need to be aware of the proposed changes and the concessions available to them. On sale, contracts will need to be adapted to ensure vendors do not inadvertently trigger penalties for seeking to pass on land tax and WGT liability to purchasers. The change in calculation of BTR special land tax will need to be factored in when structuring and assessing feasibility for BTR products.
If you have any questions about the proposed changes, or how they might impact you, feel free to contact us.