Investment
VICTORIAN LAND TAX CHANGES TO PUT RESIDENTIAL DEVELOPERS IN MORE PAIN. The Victorian Treasurer unexpectedly announced further significant property tax updates in early October, after already having introduced various significant property tax changes less than five months prior as part of the 2023-24 Victorian Budget.
Irina Tan Partner Pitcher Partners Melbourne
Photo by Dylan Lu - Unsplash
VRLT background and issues The VRLT has been a problematic property tax for years; its saving grace being that it has only applied to residential properties in the inner and middle suburbs of Melbourne. The existing problems will become more widespread with the proposed expansions to the VRLT rules. Introduced in Victoria back in 2017 as the first of its kind at the state level for residential properties (no surprises there, as the state of Victoria is often a trailblazer when it comes to property taxes), the VRLT was designed to address the number of properties left empty across inner and middle Melbourne suburbs. The government’s stated aim is to encourage “owners who unreasonably leave these properties vacant” to make them available for either purchase or rent hence reducing “the pressure on house prices and rents and add to the government’s overall housing affordability strategy”. Accordingly, the VRLT has to date targeted only areas of Melbourne where issues of housing affordability are considered most pressing. The crude supply/demand
The changes slated to impact property owners as early as 1 January 2024 include major expansions to the Vacant Residential Land Tax (VRLT) rules. The changes are in draft legislation subject to approval by the Victorian Parliament at the time of writing. What are the changes? The major changes proposed are: 1. The VRLT is to be payable (at the rate of 1% of the Capital Improved Value (CIV)) on any residential properties anywhere in Victoria that are vacant for more than six months in the previous calendar year. Previously only relevant to properties in inner and middle Melbourne, this is proposed to apply from 1 January 2025, affecting Victorian residential properties that were vacant for the requisite period in 2024. 2. The VRLT is to also apply to unimproved or undeveloped properties that have been unimproved for five years or more in certain areas of metropolitan Melbourne, that are currently not subject to the VRLT. This is proposed to apply from 1 January 2026, affecting properties that have not been developed as required by the end of 2025.
8 – November / December 2023
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