The Victorian Government has introduced amendments to its State Taxation Acts and Other Acts Amendment Bill 2023, changing the Vacant Residential Land Tax (VRLT) framework. Key changes to the Bill are outlined below: 

Expansion of VRLT to Undeveloped Land

As part of the VRLT expansion, the Bill will now apply to residential land that has remained undeveloped for five consecutive years, starting from January 1, 2026.

Additionally, undeveloped land will be exempt if an application for a planning or building permit is made for non-residential use, or if a request for a planning scheme amendment authorizing non-residential use is submitted.

Further clarity on exemption factors will be provided by the Government later this year.

VRLT Property Expansion Victoria – Consideration of Holiday Homes 

The amendment to the Land Tax Act brings into effect the Government’s decision to extend the VRLT to vacant residential properties statewide in Victoria starting January 1, 2025.

Despite this expansion, the established frameworks for application and exemptions remain unchanged. If a property remains vacant for more than six months in the preceding calendar year, it will be subject to a 1% VRLT on the capital improved value of the taxable land. Notwithstanding, specific exemptions are in place:

• All existing holiday homes, regardless of ownership through a trust or company, are exempt from the expanded VRLT as of the Government’s announcement date.
• The four-week occupancy requirement for holiday homeowners is broadened to include immediate family members’ use.

Treatment Of Newly Constructed Dwellings – Extension to Period Provided

In response to recent challenges in the residential property market, especially pronounced in the apartment sector, the Government agreed to extend the exemption period to three years from the commencement date of construction or renovation (for which a building permit is required) for a property. This extension applies if the owner demonstrates genuine efforts to sell the dwelling at or below a reasonable market price.

Rate Increase and Protections for Developers 

The major concern for the industry is an agreement to increase the VRLT rate for repeat payers, from 1% of capital improved value to 2% in the second year and 3% in subsequent consecutive years. The VRLT rate escalation will only apply on vacant dwellings, not on vacant land. 

The Government has confirmed that producers of new housing are exempt from the rate increase, and any VRLT on new homes won’t exceed 1%.

Prohibition of Land Tax Apportionment

The Bill amends the Property Law Act to exclude VRLT and assessed windfall gains tax liabilities from being subject to apportionment between vendor and purchaser. No other apportionment is impacted, including windfall gains tax where a notice of assessment has not been issued at a time a contract is entered into. 

The Government has confirmed that transactions valued at $10 million or more are exempt from these new prohibitions. 

If you have any questions or need guidance on these amendments, feel free to reach out to us.