In 2024, Victoria’s land tax system has undergone some significant changes that will affect property owners across the state. Whether you’re an individual property owner or a small business owner with land holdings, it’s crucial to understand how these changes will impact you. Land tax is an important consideration when planning finances, and the new rules could lead to increased tax liabilities, particularly for owners of multiple properties or vacant land.
This blog will break down the key changes, and their implications, and offer advice on how to navigate the updated land tax system.
The Victorian Government has passed significant legislation aimed at property owners who hold vacant residential properties, including holiday homes, for more than six months (unless an exemption applies).
The Vacant Residential Land Tax (VRLT) is in addition to the current Land Tax and the Short-Term Rental Tax that property owners are now facing. Starting in January 2025, this tax will apply to vacant residential land across all of Victoria. Under the new rule, property owners with vacant land in residential areas will be required to pay the VRLT if the property remains unoccupied for more than six months within a calendar year.
The aim of this change is to encourage property owners to either develop or lease vacant residential land, ultimately increasing the housing stock available across the state. While this change may seem focused on developers and large investors, it will also impact individual property owners who may be holding onto land for future development or investment purposes. For these property owners, the new VRLT could add a significant tax liability if the land is not actively used. Therefore, from 1 January 2025, the VLRT will expand to cover:
a) all vacant residential properties in Victoria, including regional areas;
b) unimproved land in the Melbourne Metropolitan Area, defined as Land without a home that is capable of residential development and has remained undeveloped for 5 or more years (since 1 January 2020).
VRLT rates increase based on the Capital Improved Value (CIV) and how long the property has been vacant:
If you own a property that has been sitting vacant for some time, this is an important change to be aware of. In order to avoid the tax, you’ll need to either develop or lease the land. For those who have long-term plans for their vacant properties, it may be worth reconsidering these plans in light of the new VRLT.
As part of the 2024 updates, the Victorian government has also made adjustments to the rates and thresholds for land tax. The tax rate is now tiered based on the taxable land value of a property, which determines how much land tax an individual or business will need to pay.
For example, properties with taxable land values between $50,000 and $100,000 are subject to a base land tax of $500, while properties with a taxable land value between $100,000 and $300,000 will incur a tax of $975. This tiered system is designed to make the land tax burden more manageable for owners of lower-value properties, while still collecting a fair share from owners of higher-value properties.
However, it’s important to note that these changes could increase land tax liabilities for individuals and businesses with larger property portfolios. The more land you own, the higher your tax bill could become. This could have a serious financial impact, particularly for small business owners who own both their place of business and additional investment properties.
In 2024, the Victorian government also introduced more stringent transparency and reporting requirements for land tax. Property owners are now required to disclose the ownership details of any properties they hold, along with the associated land values. This change aims to provide more clarity in the taxation system and reduce the potential for tax evasion.
For small businesses, this could mean additional paperwork when it comes to filing land tax returns. Ensuring accurate reporting is key to avoiding any penalties or fines, and businesses with multiple properties will need to stay on top of their reporting obligations to comply with these new rules.
Property investors, including small business owners who hold land for investment purposes, will be affected by the expanded VRLT. If you own vacant land that you’ve been holding for future use, the expanded VRLT could create additional costs. The best strategy is to reassess your investment portfolio and ensure that properties are either developed or leased to avoid this tax.
Additionally, the changes to the land tax rates and thresholds mean that investors who own multiple properties will need to plan for higher tax bills. It’s essential to assess whether holding onto certain properties is still financially viable under the new system, and whether it makes sense to sell or develop them sooner rather than later.
As the land tax system becomes more transparent, ensuring accurate record-keeping is crucial. Business owners with multiple properties may find that keeping track of land values and ownership details becomes more complex. Engaging a financial advisor or accountant to help navigate these changes can ensure that you remain compliant with the new rules.
For both individual and small business owners, staying ahead of the curve is key to minimising the financial impact of these changes. Work closely with your financial planner to understand how land tax will affect your financial situation and what strategies you can use to mitigate the impact. This could involve selling certain properties, developing land, or exploring other options like restructuring your property holdings.
If you own property, it’s time to review your portfolio in light of the 2024 changes. Do any of your properties have vacant land or are you planning to buy additional property? Make sure you understand how these changes could impact you.
Land tax can be complicated, and it’s always a good idea to seek professional advice. Consult with your accountant, financial planner, or legal advisor to ensure you’re fully informed and prepared for the changes. These professionals can help you structure your property portfolio in the most tax-efficient way and provide guidance on how to comply with the new reporting requirements.
The Victorian government has been introducing regular updates to land tax laws. Stay updated on any future changes, as they could further impact your property-related finances. This could be particularly important for small business owners who hold property as part of their business operations.
The 2024 land tax changes in Victoria are designed to make the system fairer and encourage the development and use of vacant residential land. However, they also come with significant implications for individual property owners and small business owners. To navigate these changes successfully, it’s important to seek professional advice, reassess your property holdings, and stay on top of your reporting obligations.
As always, careful planning and staying informed are the best ways to minimize the impact of tax changes and ensure your financial strategy remains on track.
If you have any questions or need assistance in understanding how the 2024 Changes to Land Tax in Victoria will impact your business, don’t hesitate to reach out to us at The Hrkac Group. We’re here to help you make sense of the new regulations and ensure that you stay compliant with the upcoming changes. Contact us today via our online booking form or call our Geelong office on (03) 5224 2366 to schedule a consultation and take the next step towards a healthier financial future.
