Property developers need to stay updated about the changes to
Victorian state taxes in the coming years.
In 2023, the Victorian Parliament enacted revisions to several state taxes, encompassing land tax, duty, and the Windfall Gains Tax.
Note that the revisions have different starting dates. Here is a timeline of these changes.
Changes that started when legislation was passed on June 27, 2023
CHANGES THAT STARTED ON JUNE 27, 2023 | IMPACT ON PROPERTY DEVELOPERS |
Specific “nomination agreements”, such as sub-sale transactions, among members within the same corporate group will be eligible for corporate reconstruction and consolidation concession of the Duties Act 2000 (Vic). | Under this change, when members of a single corporate group engage in a sales contract (e.g., A Co to B Co) and the 'purchaser' nominates a different entity (e.g., B Co nominates C Co) post-land development completion, concessional duty rates might be applicable.
For instance, if both transfers (i.e., A Co to B Co and B Co to C Co) involve all three companies as part of the same corporate group, concessional duty rates could be applicable.
Note that prior to the enactment of this amendment, both transfers would have incurred duty charges at a rate of 6.5%. |
Changes starting January 1, 2024
CHANGES STARTING ON JANUARY 1, 2024 | IMPACT ON PROPERTY DEVELOPERS |
Vendors cannot include land tax adjustment clauses in contracts worth $10 million or less. After January 1, 2024, these clauses will be ineffective, and vendors will face a penalty (around $60,000 per contract for corporations). However, contracts signed before this date are not affected by this change and can still enforce such clauses. | This change is expected to significantly impact the majority of property transactions, both wholesale and retail sales.
The change will not allow land tax adjustments during settlement, but may allow for the inclusion of an estimated land tax within the original contract price. |
Disallowance of apportionment for Windfall Gains Tax (WGT) between vendor and purchaser in specific land sale options or contracts.
A 'pass-on clause' is required in agreements made before WGT liability is identified (e.g., during pre-rezoning) to address potential future liabilities.
When a WGT liability is identified, it must be transparently incorporated into the purchase price of the option or contract. | This change affects residential land sale contracts (e.g., apartments, townhouses, and land), applying when the contract is signed after WGT assessment.
It impacts developers with land that underwent rezoning, triggered WGT, and deferred the liability, but doesn't affect pre-rezoning contracts.
Developers can freely adjust contract prices for apportioned WGT liabilities. |
Changes starting January 1, 2025
CHANGES STARTING JANUARY 1, 2025 | IMPACT ON PROPERTY DEVELOPERS |
Extend Vacant Residential Land Tax (VRLT) to all vacant residential land in Victoria beyond the previous scope limited to Melbourne's 16 inner and middle suburbs.
Implement heightened compliance measures for VRLT, requiring additional information from owners of potentially vacant properties, starting with apartment towers in 2024 and expanding to inner and middle suburbs of Melbourne in 2025. | This adjustment could influence the decision-making process when evaluating potential sites for acquisition and development.
Yet, for property developers who already own sites, the imposition of an extra 1.0% tax (effective in the 2026 fiscal year) based on the 'capital improved value' of the undeveloped land might serve as an incentive to start new developments. |
Changes starting January 1, 2026
CHANGES STARTING JANUARY 1, 2026 | IMPACT ON PROPERTY DEVELOPERS |
Expanding the VRLT to cover specific 'unimproved land' in metropolitan Melbourne left undeveloped for five years or longer.
This adjustment aims to boost development on vacant lots in metropolitan Melbourne and increase housing supply. | This adjustment could influence the decision-making process when evaluating potential sites for acquisition and development.
Yet, for property developers who already own sites, the imposition of an extra 1.0% tax (effective in the 2026 fiscal year) based on the 'capital improved value' of the undeveloped land might serve as an incentive to start new developments. |