It will soon be an offence to apportion land tax and WGT to purchasers.
In October 2023, the State Taxation Act and Other Acts Amendment Bill 2023 (‘Bill’) was introduced to the Victorian Parliament which proposed several changes relating to State property taxes .
This Bill has now passed both Houses in Parliament and is awaiting Royal Assent.
What are the changes?
Currently, in the standard Contract of Sale of Land (which is widely accepted in all property sales), land tax is adjusted between the vendor and the purchaser on the settlement date. This means that a vendor is liable for land tax assessed on a property up to the settlement date and the purchaser is liable for the land tax from the settlement date for the remainder of the calendar year.
The changes will make it an offence for a vendor to enter into a Contract which requires the purchaser to pay any of the vendor’s land tax liability. The prohibition will be effective from 1 January 2024.
The changes also prohibit a vendor from recovering an existing WGT liability from a purchaser (which is a tax on gains accrued on the value of land due to a rezoning). This prohibition will also be effective from 1 January 2024.
Breaches of the new laws face significant penalties of up to $11,540 for individuals and $57,700 for body corporates.
How does this affect you?
Vendors should immediately consider how these changes will affect them and update any contracts in respect of unsold properties.