As we embark into 2024, we are faced with a number of changes to the property taxation landscape coming into effect.

  • Now – No more adjustments!

Adjustments between vendors and purchasers are no longer permitted for land tax or windfall gains tax under contracts of sale under $10M entered into on and after 1 January 2024.

If you signed a contract prior to 31 December 2023 and are settling (or exercising a valid option) after 1 January 2024, you’re the last ones allowed to adjust.

For everyone else, prosecution and potential penalties will apply for breaches (currently $11,540 for individuals and $57,5700 for corporations).

Whether you are buying or selling, consider the effect these bans on adjusting will have on the end payout when considering a prospective property transfer.

  • Coming soon – No vacancies

Residences – previously only applicable to certain council areas in inner Melbourne, from 1 January 2025 the Vacant Residential land tax (VRLT) will apply to all residential land in Victoria. A property is ‘vacant’ if it is unoccupied 6 months in the previous year (noting that on 1 January 2025 the SRO will be looking at occupation over the 2024 year).

VRLT is payable in addition to land tax and could be between1% to 3% of the property’s Capital Improved Value (not the land value), starting at 1% for the first year and increasing each consecutive year it remains vacant. Exemptions (e.g. holiday homes) are limited and conditional.

Land – from 1 January 2026, the VRLT will also apply to unimproved residential land and potential residential land in Melbourne if that land is capable of being developed but has remained undeveloped for 5 years.

Consider your plans for any residential investment properties (whether developed or empty block) very carefully going forward.

  • Forecast – farewell commercial stamps

In the announcement of the Victorian Budget 2023-2024 it was proposed that once-off stamp (land transfer) duty for commercial and industrial properties be removed and replaced with an annual Commercial and Industrial Property Tax (CIPT). Per the Budget’s announcement, it is intended that after 1 July 2024  a final stamp duty is payable on a commercial or industrial property transfer. Following that transfer and final stamp duty, the CIPT becomes payable annually starting after 10 years have passed.

The annual tax is proposed to be 1% of the property’s unimproved land value.

Despite proposing a start date of 1 July 2024, this proposed tax has not been signed off on yet- keep watching this space.

If you have any queries regarding any of these points, please do not hesitate to contact NextGen Legal on (03) 9039 2142.