What you need to know!
Land Tax Basics:
1. What is Land Tax?
– Land tax is a state-based tax on the unimproved value of land. It is an annual tax payable by landowners. The Land Tax is calculated as of 1 January each year and applicable for the calendar year.
2. How Is Land Tax Calculated?
– Land tax is calculated based on the site value of the property as assessed by the Valuer-General and subject to exemptions and threshold of total land held by the landowner in Victoria. Different rates may apply to different property types.
3. Exemptions and concessions
Victoria offers exemptions and concessions for land tax for the below properties.
– Principal Place of Residence;
– Primary Production Land; and
– Charitable or Religious Organisations.
Understand your obligations:-
On 3 October 2023, the State Taxation Acts and Other Acts Amendment Bill 2023 (the Bill) was introduced into the Victorian Parliament. If passed, the Bill will shortly result in significant changes to Victorian tax laws in land tax, windfall gains tax (WGT), and duty. The Bill is proposed to amend the Sale of Land Act 1962 and Property Law Act 1958 and to be effective from 1 January 2024.
- The reform prohibits adjustments for land tax or existing Windfall Gains tax liabilities.
This means that during a property settlement, the Vendor can no longer seek the outstanding land tax to be apportioned by the Purchaser from the settlement date to the end of the year.
We note this could unfairly impact Vendors, especially if they sell the property at the start of the year. They will be required to pay the land tax for the whole year despite the fact that they do not own that property for the whole year.
- The reform will also broaden the vacant residential land tax regime.
Currently, in Victoria, a vacant residential land tax of 1% of the capital improved value (not the ‘unimproved’ land value) is applied to residential properties that have been vacant for an aggregate of six months or more in the previous calendar year (some exemptions apply). This tax has only been applied to 16 inner and middle Melbourne council areas.
The proposed changes are said to affect two key areas. Broadly:
- Vacant residential land tax will be expanded from the current inner and middle Melbourne council areas to all vacant residential land throughout Victoria. These changes will take effect from 1 January 2025 (that is, the 2025 land tax year).
- From 1 January 2026, the definition of ‘residential land’ will include ’unimproved’ land in established areas of metropolitan Melbourne that are not in a specified non-residential zone and have remained undeveloped for a period of five or more years.
- Calculation of capital improved value for valuation purposes.
The reform will see the calculation of the capital-improved value to include fixtures and the value of fixtures whilst determining the capital-improved value of the land. This calculation method will be effective from 1 January 2024 and will likely impact valuations for rates, fire services levy, Windfall Gain Tax, and vacant residential land tax.
Contact Us
Have questions or need assistance? Contact the State Revenue Office (SRO) or book a consultation with us to discuss how the reform will impact you.
Principal Solicitor
VK Lawyers
Disclaimer: This flyer is for informational purposes only and does not constitute legal advice. Please consult a tax professional for specific questions about your land tax obligations.
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