February 2, 2024

Navigating the 2023 State Tax Changes: A Comprehensive Guide

As we usher in a new year, businesses and individuals must know the significant changes to state taxes. We are here to guide you through these changes and help you understand their implications, brought about by the State Taxation Acts and Other Acts Amendment Act 2023. These amendments will impact several acts, including the vacant residential land tax and prohibitions on land tax and windfall gains tax apportionment. 

The Vacant Residential Land Tax (VRLT)

Starting from 1 January 2025, the VRLT will apply to all residential lands across Victoria if vacant for more than six months in the preceding calendar year. A new progressive rate of VRLT will be introduced, applicable to non-exempt vacant residential lands based on the number of consecutive tax years the land has been liable for VRLT.

Furthermore, from 1 January 2026, VRLT will extend to all unimproved residential lands in metropolitan Melbourne that have remained undeveloped for at least five years and are capable of residential development.

Exemptions will be introduced for unimproved residential land contiguous to a principal place of residence and unimproved land incapable of being used or developed for residential purposes. The VRLT holiday home exemption will also be amended to allow a relative of the owner or vested beneficiary to satisfy the usage and occupancy requirement.


Prohibitions on Land Tax and Windfall Gains Tax Apportionment

The Sale of Land Act 1962 and Property Law Act 1958 will be amended to prohibit land tax apportionment between a vendor and purchaser under a land sale contract, except for high-value property transactions ($10 million or greater). Additionally, the windfall gains tax cannot be passed on to a purchaser under a contract or option agreement entered after the windfall gains tax liability has been assessed.


Other Significant Changes

The Land Tax Act 2005 has been amended to ensure the Build-to-rent (BTR) special land tax formula reflects the correct and absentee owner surcharge rates. Various amendments have been made to ensure owners of charitable, municipal, and public land and nominated PPR beneficiaries of unit trust schemes and discretionary trusts are not required to pay the fixed lump sum component of the COVID-19 debt temporary land tax surcharge more than once.

The foreign purchaser additional duty exemption and absentee owner surcharge exemption reports will be tabled in Parliament every 12 months instead of every six months. Eligibility requirements of the pensioner and concession card duty reduction scheme now apply to all transferees in a property transaction.

The Valuation of Land Act 1960 and Fire Services Property Levy Act 2012, among other Acts, have been amended to clarify definitions, eligibility requirements, and land use classifications.


How LEAD Advisory Group Can Help

Understanding and navigating these state tax changes can be complex. However, with expert guidance from LEAD Advisory Group, you can confidently navigate these alterations and understand their implications for your business or personal finances.

Contact LEAD Advisory Group today for personalised support and advice. We're here to lead you through these changes, ensuring compliance while optimising your tax strategy. 

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