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Victorian State Budget 2021-22: Land Tax

Victorian State Budget 2021-22: Land Tax

For the first time in more than ten years, the Victorian Government has announced an increase in land tax rates. Properties with an unimproved value of $1.8 million or more will be stung with a significant amount of additional land tax, with the hike expected to raise more than $1.53 billion in revenue over the forward estimates period.

The key land tax changes include a 50% Windfall Gains Tax payable on the rezoning of land, increasing the land tax threshold for owners and absentee owners, increasing land tax rates for taxpayers with taxable landholdings of $1.8 million or more, providing that a partner in a partnership is taken to have a beneficial interest in partnership property, and extending the exemption for vacant residential land tax for new developments.

The key land tax changes

  • Windfall Gains Tax of 50% of uplifts in value greater than $500,000 due to rezoning, with phasing-in of the tax on uplifts between $100,000 and $500,000. Land subject to the Growth Areas Infrastructure Contribution will not be affected.
  • The land tax tax-free threshold for individuals and companies (absentee and non-absentee) will be increased from $250,000 to $300,000.
  • The land tax rate will increase from 1.3% to 1.55% for land with a taxable value above $1.8 million and not exceeding $3 million.
  • The land tax rate will increase from 2.25% to 2.55% for land with a taxable value above $3 million.
  • An exemption from Vacant Residential Land Tax (VRLT) will be available for newly completed homes for two years after completion, where the home has not been used or occupied and has not changed in ownership.
  • Partnership land held by a nominee entity may benefit from the general rates of land tax where a nomination of the partnership interests is made.

When do the changes apply from?

The following are the expected start dates of the new measures:


Start date

Windfall Gains Tax

1 July 2022*

Increase to tax-free threshold for land tax

1 July 2021

Increase in land tax rates

2022 land tax year (based on ownership of land as at midnight 31 December 2021)

Nomination of partnership interests

2022 land tax year (based on ownership of land as at midnight 31 December 2021)

VRLT exemption for newly completed homes

2022 land tax year (based on ownership of land as at midnight 31 December 2021)

*Subject to confirmation once the legislation is introduced into Parliament.

How will the changes impact property developers and landowners?

50% Windfall Gains Tax

Unfortunately, the Budget does not reveal any further details on the 50% Windfall Gains Tax announced by the Treasurer on the weekend. Read our bulletin about how the tax may apply the rezoning of farming land, here.

However, the Budget Papers indicate that the tax will be payable on a rezoning of land between zone types (e.g., from Industrial to Residential), rather than between zone sub-categories (e.g., from General Residential Zone 4 to General Residential Zone 1).

The tax is forecast to raise $123.6 million of revenue in the forward estimates period. In our view, the Government’s figure is a significant underestimate due to the rate of the tax and the number of land parcels it is likely to impact.

As soon as further details about the Windfall Gains Tax are available, we will publish our commentary, here. Stay tuned.

Increase in land tax threshold and rates

From the 2022 land tax year, the land tax threshold will be increased from $250,000 to $300,000 for owners and absentee owners (other than trusts), which will result in more than 60,000 taxpayers, including many small businesses, no longer having to pay land tax.

On the other hand, property owners with taxable landholdings exceeding $1.8m will be stung with higher rates of land tax, resulting in significant increases to the holding costs of landlords, including those who have provided rent relief through the pandemic. From the 2022 land tax year, property owners should expect:

  • a 19% increase in land tax on properties with a taxable value between $1.8 million and $3 million, with the rate to increase from 1.3% to 1.55%; and
  • a 13% increase in land tax on properties with a taxable value of more than $3 million, with the rate to increase from 2.25% to 2.55%.

The land tax hikes mean that owners of land with a taxable value of $5 million will pay an additional $9,000 of land tax per year, while owners of land with a taxable value of $10 million will pay an additional $24,000 per year.

Taxable value

Current land tax payable

Land tax payable under new rates














For commercial landlords with multi-tenanted properties, the land tax rate increases are likely to be magnified. Read more about how the land tax rate increases will affect commercial landlords, here.

It is now more important than ever for landowners to carefully consider how they structure their property holdings to combat even higher land tax bills in future.

Vacant Residential Land Tax

In a win for developers, an exemption from VRLT will be available for land that becomes residential land during the first year of the two years preceding a tax year provided that, for the period from which the land becomes residential land up to the tax year, the land has not been used or occupied and has not changed in ownership.

The exemption gives developers further time to either sell or lease their newly developed residential premises before becoming subject to the VRLT. The new rule will effectively exempt completed housing stock from VRLT for two years after completion, which will be welcomed by developers, especially in a slowing CBD apartment market. Below is an example of how the exemption will operate.


  • Reach For The Sky Pty Ltd purchased a vacant parcel of land in Port Melbourne in 2017, on which it constructed a low-rise apartment building.
  • Certificates of occupancy and certificates of title for the 30 apartments were issued in November 2020.
  • Due to COVID-19, the developer has been unable to sell 10 of the 30 apartments, despite aggressively advertising the apartments.
  • The 10 apartments had not been used or occupied, or sold as at 1 January 2022.

Under the current rules, the 10 unsold apartments would have been exempted from VRLT in the 2021 land tax year but would be subject to VRLT in the 2022 land tax year. However, under the new rules, the 10 unsold apartments would be exempted from VRLT in both the 2021 and 2022 land tax years, effectively giving Reach For The Sky an additional year to sell its completed stock.

Pitcher Partners made a submission to the Treasurer on this issue leading up to the Budget as we believed it was unjust for developers to be charged with a VRLT liability in circumstances where they have been actively trying to sell their stock but the market conditions and COVID-19 have made it very difficult to do so.

Nomination of partnership interests

From the 2022 land tax year, a partner in a partnership will be taken to have a beneficial interest in partnership property for land tax purposes. This means that where, for example, a company holds land as nominee for a partnership (which would ordinarily be assessed to land tax at the trust surcharge rates), the nominee can nominate each partner as a nominated beneficiary under the trust surcharge regime.

The change is consistent with the Commissioner’s current practice of treating nominees holding partnership trusts as a fixed trust for land tax purposes.

The effect of a nomination is that the nominee will be assessed to land tax at the general rates of tax. In addition, each partner will be assessed on their interest in the partnership property on their individual assessment, where a partner holds other taxable property. A credit will be applied for the land tax paid on the partnership property by the nominee.

Further, where Partnership A has an interest in Partnership B (whether directly or indirectly through one or more other partnerships) each partner in Partnership A is taken to have a beneficial interest in the property held by Partnership B, to the extent of its interest in Partnership B.

Before making a decision to nominate under the new provision, we encourage our clients to carefully consider whether the nomination will be advantageous to their land tax position.

Other changes

In addition to the key changes outlined above, the following land tax amendments will also come into effect:

  • From 1 January 2022, private men-only clubs will no longer receive the land tax concession reserved for charities, clubs and associations.
  • For the purpose of assessing land tax on land under a shared equity arrangement (including the application of any exemptions or concessions) from the 2022 land tax year, no account is to be taken of any interest the State has in the land. This amendment is relevant to homeowners who have received assistance in buying their homes through a Government-backed equity scheme.
  • From the 2022 land tax year, the formula used to calculate land tax in the case of pre-2006 land owned by the trustee of a discretionary trust that is used and occupied by a nominated beneficiary as a principal place of residence, will be amended.

What are the next steps?

Contact your Pitcher Partners representative if you have any queries regarding the announced land tax measures and the implications for your land tax position.

Click here to return to the Victorian Budget 2021-22.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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