Significant considerations for landholders

The Victorian Government introduced the State Taxation Acts and other Acts Amendment Bill in October 2023 to address housing issues. Some of the significant changes include:

1. Victorian Residential Land Tax (VRLT):

• From January 1, 2025, VRLT will apply to properties throughout Victoria.

• From January 1, 2026, the definition of 'residential land' expands to undeveloped Victoria land in certain areas of metropolitan Melbourne.

• Covid Debt Repayment Plan until June 30, 2033, with a decrease in the land tax-free threshold from $300,000 to $50,000 from January 1, 2024.

2. VRLT Changes:

• VRLT, currently applicable to Melbourne's inner suburbs, will extend statewide.

• The definition of 'residential land' expands to undeveloped land in certain metropolitan areas after 5 years.

3. VRLT Exemptions:

• Exemptions include properties used for business purposes, land transferred or turned residential, some contiguous land to the owner's primary residence, and holiday homes occupied by the owner for at least four weeks.

4. Impact on Developers and Investors:

• Developers may face significant costs, e.g., a $10m Capital Improved Value increase resulting in an additional $100,000 in land tax.

• Investors with residential properties may incur additional land tax costs based on property value and VRLT.

5. Land Tax & Covid-19 Debt:

• Covid Debt Repayment Plan includes a landholding component affecting land tax rates.

• Tax-free threshold decreases to $50,000; temporary fixed charges and increased rates apply based on property value.

6. Windfall Gains Tax (WGT):

• Since July 1, 2023, WGT applies at 50% on the uplift in the capital improved value of land resulting from rezoning, triggered if the taxable value uplift is more than $100,000.

• Some rezonings have exclusions or exemptions from WGT.

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