The 2023 Victorian State Government Budget has been released, and there are some noteworthy changes to the land tax system as a result of the impact of COVID-19.
From 1 January 2024:
- The tax-free threshold for general land tax will be lowered from $300,000 to $50,000;
- A ‘COVID-19 debt temporary surcharge’ will apply in addition to existing land lax as follows:
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- $500 flat fee will be charged for taxable landholdings between $50,000 and $100,000;
- $975 flat fee will be charged for taxable landholdings between $100,000 and $300,000;
- $975 flat fee will apply and an increased rate of land tax by 0.10% of the value for taxable landholdings above $300,000; and
- $975 flat fee will apply and an increased rate of land tax by 0.10% of the value for trust taxpayers with landholdings over $250,000.
These changes are expected to help repay approximately $4.74 billion (of the $31.5 billion spent by the Government during the pandemic). This will impact 860,000 taxpayers; which includes 360,000 new taxpayers who have not previously been required to pay land tax.
Anyone currently holding property or looking to enter the market, should consider their options immediately.
Exemptions
All existing land tax exemptions will still continue to apply. The main exemption, being the principal place of residence, saves land tax being charged on the home in which you reside.
Other exemptions include land used for primary production purposes (for example, farmland), retirement homes and land owned by charities or religious institutions.
Absentee surcharge doubled
The Government also proposes to increase the Absentee Owner Surcharge from 2% to 4%. The minimum threshold for non-trust landowners will also reduce from $300,000 to $50,000 – and will remain the same for trusts.
This applies to all types of taxable land including commercial and industrial land.
Stamp duty removed for commercial properties – replaced with annual property tax
From 1 July 2024, stamp duty on commercial and industrial properties will be eliminated and replaced with an annual property tax. This will be at a set rate of 1% of the properties unimproved land value.
The first purchaser of a commercial or industrial property will be given two options to pay the property’s stamp duty:
- Upfront; or
- Pay fixed instalments over 10 years equal to stamp duty (plus interest, funded by a government-facilitated transition loan).
Extensions to builder insolvencies
From 1 January 2024, if you are affected by builder insolvencies, you will be able to extend the land tax exemption for an additional 2 years if your principal residence is undergoing construction or renovation.
What does this mean for you?
These changes have not yet received final approval from the Victorian Parliament. However, they are set to receive final approval soon. We recommend that you follow any updates and be proactive in considering your landholding and budgeting for these changes.
If you own land or are a potential buyer and are unsure as to how these changes will affect you, please contact our experienced property and commercial team on (03) 9481 2000 or info@tauruslawyers.com.au.