Victorian Land Tax changes

As part of the 2023-24 budget, the Victorian Government has proposed significant land tax increases.

The Government centralised valuation assessments to achieve better consistency of application and with increased valuations (maybe attributed to COVID) and no change to the progressive rate scales of 10 years ago huge rises in Land Tax are forecast. Tax increases of 300 per cent in some cases – many have doubled.

What does this mean for the real estate profession and the markets they play key roles in?

Prospective or active vendors should now look at how they can afford this annual tax? Quite often Land Tax is levied on ‘holiday homes’ receiving no rental income to help pay the bills, a luxury for some. In an actual example – a modest holiday home on the Mornington Peninsula (valued in 2019 at $1,080,000 and currently $2,440,000) – estimated land tax over the years would be:

• 2019: $3,615

• 2020: $4,415

• 2021: $4,575

• 2022: $6,815

• 2023: $19,295

Now there is an additional impost announced in the Victorian State Budget, the latest announcement adds another $3,415 to this property.

As a refresher for real estate agents the new rates announced are:

General land tax rates

• For taxable landholdings between $50,000 and $100,000 — a $500 flat surcharge will apply

• For taxable landholdings between $100,000 and $300,000 — a $975 flat surcharge will apply

• For taxable landholdings over $300,000:

• A $975 flat surcharge

• An increased rate of land tax by 0.10 %

Other land tax amendments proposed include:

• The threshold at which taxable land is assessed has been lowered from $300,000 to $50,000

• Absentee owner surcharge rate will increase from 2 per cent to 4 per cent

• The land tax exemption for principal places of residence under construction or renovation will be expanded to provide the Commissioner of State Revenue with discretion to extend period by two years if the builder goes into liquidation.

• A new land tax exemption will apply to land owned by an immediate family member and used as the home of an individual eligible to be a beneficiary of a special disability Trust, including where a special disability trust has not been established.

A common question from prospective or active vendors is when is the right time to sell? Perhaps these pending Land Tax changes will lead to an increased supply of ‘holiday homes’ in certain markets. The well-versed real estate agent will be best place to answer the age old question for the right time to sell and along with consulting with other professionals to consider all the factors, Capital Gains Tax, interest rates, general repair of the property, etc, to deliver the best result for the vendor.