Land tax changes are here

March 4, 2024 BY

Preston Rowe Paterson are experts in statutory valuation matters.

WITH GARETH KENT Director, Preston Rowe Paterson Geelong

Summer is truly here, along with bushfires and 30+ degree days, and aren’t you glad you live near the coast!

I want to start this article with a tribute to a dear old friend, Dennis More, who passed away peacefully last week. In truth it took me all week to get over this news, he was one of the last real gentlemen. Dennis and I got to know each other through the work I did on his many property interests.

Dennis loved to push the boundaries of what was permissible. And nothing more so than his attempt to build his own marina in Leopold several years ago. This caused an enormous amount of strife with local authorities, which Dennis thoroughly enjoyed! I remember visiting him on site, with Dennis and his mates doing the civil works themselves.

Many would remember the fire in his factories in Bridge Street Newtown. One of my staff was nearby the incident when it started, and I called Dennis to let him know. His reaction was priceless: “You must be joking, I didn’t pay the bloody insurance!” I never knew if he was joking or not.

Dennis would arrive onsite in his old Ford panel van, accompanied by his dog, he would be wearing his overalls in winter or shorts and thongs in summer. He was the most humble, yet successful person in property I have ever met, a “Property Genius”!

When I got involved with Lazarus Community Centre for the homeless, Dennis supported me without being asked or expected. He simply rang me and said “What do you need, young fella?”. He continued to support so many local charities and community groups, including the Geelong West Football club, and many more. He loved his regular seat near the glass at the Geelong Cats Social club rooms.

Vale Dennis; may you enjoy your rest, old friend.

Looking through the Geelong sales records from the weekend it seems that the residential property market is beginning to grow some momentum, with some really good buys, and also some great auction outcome for sellers with more than a few exceeding expectations. Crowd numbers at auctions also appear to be increasing along with participation.

Forecasts for 2024 Geelong property remain consistently positive. The macro economic picture is also positive, with inflation slowing, wages remaining steady and unemployment remaining low, there is growing anticipation from forecasters of the RBA cutting rates in the later part of the year. The CBA has predicted five rate cuts post September 2024, that could bring the cash rate back to circa 3.5 per cent, the seeds are planted for further growth.

However, there are some legislative taxation issues that may serve to curtail investors from the property market in Victoria, none more so than the changes to the Land Tax.

This month, the State Revenue Office have begun issuing Land Tax Notices for taxable properties owned as at December 31, 2023. Land Tax has traditionally been calculated as a percentage of the total Site Value of the non-exempt properties that are owned when that value exceeds $300,000.

This year, however, to begin recouping $31.5 billion in debt the state accumulated during the pandemic, changes have been made under the banner of a “COVID Debt Levy”.

The tax-free threshold for land tax will drop from $300,000 to $50,000. This breaks down to include a “temporary surcharge” of $500 and will be taxed for $50,000-$100,000 and $975 for more than $100,000. A further 0.10 per cent increase to the variable land tax rate will apply over $300,000. For trusts over $250,000 the $975 surcharge and the 0.10 per cent variable rate increase will apply.

While that will increase the numbers for those already paying land tax, it is also the first time a lot of previously exempt land holders – more than 300,000 this year – will receive a Land Tax assessment notice.

Vacant Residential Land Tax has been around since 2018 and applies an annual tax of 1 per cent on the property’s Capital Improved Value if it is vacant residential land in a number of suburbs within metropolitan Melbourne.

A proposed expansion of this tax is pending, notably to remove the geographic restrictions, meaning the tax will cover any relevant land throughout Victoria. Further changes to the definition of vacant land are being contemplated, to capture more examples of “underutilised land”. And the VRT rate will also be amended to increase when the tax is applicable for consecutive years.

The Windfall Gains Tax is now in full swing, having come into effect for land rezoning events after July 1, 2023. This involves the taxation of the uplift in value of rezoned properties, calculated by deducting the Capital Improved Value before the rezoning, from the Capital Improved Value after the rezoning. If the uplift in value is less than $100,000, no tax is payable. Between $100,000 and $500,000, the uplift is taxed at 62.5 per cent, and for uplifts over $500,000, the uplift is taxed at 50 per cent.

All of the above tax changes are based on statutory assessments of Site Value or Capital Improved Value.

Preston Rowe Paterson are experts in statutory valuation matters. Should you be aggrieved by an assessment, only a short time frame for objections is available in most cases. If you wish to discuss your valuation, reach out to a member of the PRP team.