ByLawyers News and Updates

Adjustments and land tax in 2024

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By Russell Cocks, Solicitor

Adjustments

As of 1 January 2024, practitioners need to ensure that the form of contract that they are using for the sale of real estate complies with amendments to the Sale of Land Act 1962, being new s 10G and s 10H. These amendments apply to contracts for a purchase price of LESS THAN $10,000,000 indexed: s 10I.

It is the responsibility of practitioners to ensure that contracts that may be signed after 1 January 2024 are compliant. These changes also need to catch up with any contract that was prepared before 1 January 2024 and may be awaiting execution, especially those provided to estate agents in anticipation of a sale, but which did not occur before 1 January 2024.

Section 10G provides that a condition in a contract is of no effect to the extent that the provision purports to require the purchaser to contribute to the vendor’s Land Tax. Such conditions are virtually universal, so this change will affect 99.9% of contracts for the sale of land. The section only applies to contracts that come into force after 1 January 2024.

Including a condition in breach of the Act in a contract AFTER 1 January 2024 exposes the vendor to a substantial financial penalty.

Land Tax is not a factor in the great bulk of conveyancing transactions that relate to the sale of a Principal Place of Residence or, to a lesser extent, exempt farming properties, as these categories of property do not attract Land Tax, so no adjustment is required. However, it will still be an offence to include reference to Land Tax in the adjustment condition, so it is important to ensure that ALL contracts are reviewed to ensure that Land Tax is REMOVED from the outgoings to be adjusted at settlement.

The change will have the greatest effect in relation to the sale of commercial/industrial properties and where a vendor owns multiple properties. While adjustments may be conducted in the “normal” way if the contract was signed before 1 January 2024, no adjustment can be made in respect of Land Tax for any contract that came into existence after 1 January 2024.

An area where this change will be significant, and perhaps not before time, is where a residential land subdivider includes adjustment conditions that pass on what can be substantial and generally unexpected Land Tax liabilities. In extreme examples, subdividers include conditions that pass on the vendor’s Land Tax, often at the subdivider’s high rate, from the date of the contract rather than the date of settlement. This results in “Mum & Dad” purchasers unwittingly becoming responsible for many thousands of dollars of the subdivider’s Land Tax. It may be this extreme example of consumer abuse that has prompted this “big stick” response of prohibiting Land Tax adjustment at all.

In a similar vein, s 10H prohibits contractual conditions (including in options) that seek to adjust the vendor’s existing Windfall Gains Tax (WGT) liability. WGT commenced on 1 July 2023 (see the Legal Practitioners Liability Committee Windfall gains tax hub for details) so it is not likely that this amendment will affect any or many contracts. WGT MIGHT potentially apply to any land (except GAIC land) that is rezoned with a consequential gain in value. The amendment only prohibits adjusting WGT in respect of an EXISTING WGT liability (assessment). It does not prohibit an adjustment condition in a contract that allows adjustment of a future WGT assessment which arises during the course of the contract. The parties may agree that this will be borne by the vendor, who will receive the assessment, maybe the responsibility of the purchaser at settlement or may be apportioned between the parties according to some agreed formula.

A vendor with an EXISTING WGT liability must take that liability into account when calculating the price for which the vendor is prepared to sell the land. That EXISTING WGT liability CANNOT be passed on, in whole or in part, to the purchaser and will become payable by the vendor in full at settlement.

Land tax

In addition to changing how Land Tax can be adjusted on sale, amendments to the Land Tax Act 2005 change existing Land Tax obligations and create new obligations.

Section 34A presently imposes a vacant residential land tax on taxable land capable of being used for residential purposes within certain municipal districts of Melbourne. That tax is to be extended from 1 January 2025 to apply to all land in Victoria which is taxable vacant residential land. This tax applies to homes, not vacant land, which have been vacant for more than six months in the preceding calendar year, commencing 2024, and attracts land tax at the rate of:

  • 1% Capital Improved Value (CIV) in first year;
  • 2% CIV in second year; and
  • 3% CIV in third year.

Section 34B(2)(b) introduces a new tax from 1 January 2026 on vacant land suitable for residential use within metropolitan Melbourne if the land has been vacant for five years in one ownership. This tax applies to unimproved land.

Closing loopholes – FED

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A raft of amendments closing loopholes in the Fair Work Act 2009 commenced on 15 December 2023.

Changes introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 include:

Redundancy

Entitlement to a redundancy payment is extended to employees of a small business, being one with fewer than 15 employees, in certain circumstances. Generally, such businesses are exempt from the requirement to pay redundancy. However, under the amended provisions employees may be entitled if the employer is bankrupt or in liquidation and the  only reason the exemption applies is that the trustee in bankruptcy or liquidator has reduced the number of employees to less than 15.

Labour Hire

New provisions in Part 2-7A of the Fair Work Act restrict labour hire arrangements and allow employees or unions to apply to the Fair Work Commission for regulated labour hire arrangement orders prescribing the rates of pay that employees under a labour hire arrangement must receive. However, any such orders made by the Commission have no effect until at least 1 November 2024. The new provisions also introduce strict anti-avoidance provisions and civil penalties. There are some exceptions to the Commission’s ability to make orders, including for small business employers.

Unlawful dismissal

Prohibited grounds for dismissal are extended to include the fact that an employee is subject to domestic or family violence.

Right of entry

The amending Act removes the requirement for state or territory work health and safety representatives to hold an entry permit before entering a workplace. However that innovation is a subject to review after 9 months.

Further amendments

The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 includes additional provisions criminalising the intentional underpayment of wages by employers. Those provisions do not commence until 1 January 2025.

Publication updates

The By Lawyers Employment Law commentary has been updated accordingly. The amending Act’s further provisions will be the subject of additional publication updates in due course, as required.

State taxation – VIC

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Amendments to various state taxation provisions affecting conveyancing transactions came into effect on 1 January 2024.

Summary of amendments

Amendments introduced by the State Taxation Acts Amendment Act 2023 and the State Taxation Acts and Other Acts Amendment Act 2023 include:

  • A prohibition on apportioning land tax between a vendor and a purchaser at settlement under a contract of sale of land when the sale price is under the prescribed threshold, currently $10M.
  • A prohibition on apportioning an existing windfall gains tax liability between a vendor and a purchaser under a contract of sale of land or an option agreement.
  • The introduction of a temporary land tax surcharge which will expire after 10 years in addition to existing land tax rates – part of the government’s debt levy measures to recover COVID related spending.
  • An increase of the absentee owner surcharge rate from 2% to 4%, and a reduction of the tax‑free threshold from $300,000 to $50,000 for non-trust absentee owners, with the minimum threshold for trusts unchanged.
  • An extension of the land tax exemption for owners affected by builder insolvencies for an additional two years for a principal residence undergoing construction or renovation.

Land tax and windfall gains tax

Land tax

A new s 10G of the Sale of Land Act 1962 makes it an offence for a vendor to enter into a contract of sale of land that purports to apportion land tax between a vendor and a purchaser when the sale price is under the prescribed threshold. The threshold, set out in s 10I of the Act, is $10,000,000 for 2024, and will be adjusted annually for CPI. Any such clause will be taken to have no effect.

Windfall gains tax

A new s 10H of the Sale of Land Act 1962 makes it an offence for a vendor to enter into a contract of sale of land or an option agreement that apportions an existing windfall gains tax liability to a purchaser. Any such clause will be taken to have no effect.

Adjustment of the purchase price

The allocation of land tax and windfall gains tax liabilities may be reflected in the negotiated purchase price, but cannot be an adjustment on settlement.

Pre-1 January 2024 contracts and options

Sections 10G and 10H do not apply to a contract of sale entered into before 1 January 2024. Further, s 10H does not apply to an option to enter into a contract of sale granted before 1 January 2024, or a contract of sale entered into on or after 1 January 2024 under the exercise of an option that was granted before 1 January 2024.

By Lawyers updates

The commentaries in the Sale of Real Property and Purchase of Real Property guides in the Conveyancing (VIC) publication have been updated to account for these state taxation amendments. The land tax amendments are reflected in clause 15 of the By Lawyers Contract of Sale of Land, and a note concerning the land tax and windfall gains tax offences has been added to the Retainer instructions – Sale of real property.

First remand hearing – VIC

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New procedures apply to the first remand hearing for criminal matters in the Magistrates’ Court from 8 January, 2024.

A first remand hearing is when an accused in custody is initially brought before the court. Under Practice Direction no. 1 of 2024, the accused is required to attend in person unless the court has directed under s 42MAA(1) of the Evidence (Miscellaneous Provisions) Act 1958 that they can appear online.

An application under s 42MAA(1) for the accused to appear online can be made by a police officer, the prosecutor, or the accused’s lawyer.

The application must include:

  • a statement as to how an online appearance is consistent with the interests of justice;
  • a statement either that the accused consents to appearing online or that exceptional circumstances apply, in which case they must be set out;
  • whether the accused has received legal advice;
  • whether there are facilities to enable the accused to communicate with their lawyer before and during the hearing;
  • whether the accused intends to apply for bail;
  • whether the accused requires an interpreter; and
  • whether the accused identifies as Aboriginal or Torres Strait Islander

Lawyers must also appear in person at the first remand hearing. Exceptions to this requirement apply if the court has directed that the client can appear online, or the client is Aboriginal and the lawyer’s appearance would assist the court considering the issues in s 3A of the Bail Act1977, but the lawyer cannot appear in person, or the court has directed otherwise. If an exception applies the lawyer can attend online.

If appearing online, it is the practitioner’s responsibility to ensure they have audio-visual capability from an appropriate, private location and their online appearance must not cause delay or interrupt the court.

The By Lawyers Criminal Magistrates Court guide has been updated accordingly, including with the new form of application.

 

 

Fixed term employment contracts – FED

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Limitations apply to fixed-term employment contracts from 6 December 2023, with the commencement of the final tranche of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022.

Fixed-term employment contracts

A fixed-term contract of employment is one that terminates at the end of an identifiable period, such as on a set date or at the end of a season.

Under fixed-term contracts, full-time or part-time employees have comparable conditions and entitlements to permanent employees, including leave entitlements, but no right to redundancy or unfair dismissal claims on termination at the end of their contract period.

Limitations on fixed-term employment contracts

The legislative amendments introduce limitations which apply to fixed-term contracts entered after 6 December 2023.  The limitations do not apply to contracts entered earlier, however earlier contracts are taken into account when determining consecutive contract periods.

Fixed-term contracts now cannot be used for the same role for more than two years, or by extending or renewing a fixed-term contract for a role that would otherwise be an ongoing full-time or part-time position even if the total period is less than two years. Only one extension option is allowable.

Exceptions to limitations on fixed-term employment contracts

A new s 333F of the Fair Work Act sets out various exceptions which, if applicable, mean the new limitations do not apply and a fixed term contract can be for more than two years or have multiple extensions. These essentially require there be a good operational reason for the fixed-term contract continuing, or the employee to have annual earnings under the contract above the high-income threshold.

Neither the limitations nor the exceptions apply to casual employees.

See the Fair Work Australia Fixed Term Contract Information Statement for further details.

Amending legislation

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 passed Federal parliament in December 2022, making many changes to the Fair Work Act 2009.

These amendments have all now commenced and include:

  • expansion of the objects of the Fair Work Act;
  • equal pay provisions to address gender inequality;
  • prohibition of pay secrecy – designed to augment the equal pay provisions;
  • prohibition of sexual harassment in the workplace, including Stop Sexual Harassment Orders via the Fair Work Commission;
  • additional grounds for anti-discrimination in the workplace;
  • expanded availability of flexible work arrangements;
  • a new small claims process for unpaid entitlement recovery; and
  • fixed-term contracts are generally no longer permitted.

Publication updates

The By Lawyers Employment Law publication has been updated for all the relevant amendments.

 

 

Conveyancing cases – VIC

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New conveyancing cases have been added to By Lawyers reference manual 1001 Conveyancing Answers (VIC) as part of a review by our author Russell Cocks. The publication has been generally updated for recent developments in the law and practice.

New cases on various aspects of the conveyancing process have been added, including:

Practical commentary has also been added about setting up and running electronic workspaces in the electronic lodgement platforms.

1001 Conveyancing Answers (VIC) is available in the Reference Materials folder on the matter plan in all Victorian By Lawyers conveyancing and property guides. It contains many conveyancing cases with summaries and hyperlinks. It assists property lawyers and conveyancers to understand more complex issues in the conveyancing process and solve problems for their clients.

 

Priority Property Pool – FED

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From 30 October 2023, under a new Federal Circuit and Family Court of Australia practice direction, special procedures apply for property matters that qualify as Priority Property Pool (PPP) Cases.

Some registries of the FCFCOA have operated special arrangements under the PPP500 pilot since February 2020. The arrangements will now apply to proceedings in all registries.

Priority Property Pool Cases are those where the net value of the asset pool is, or appears to be, less than $550,000 excluding superannuation interests, or not significantly greater and the court considers it appropriate to include the matter as a PPP case.

Previously, under the pilot program, the cap was $500,000.

Priority property Pool cases can include matters involving applications for property settlement, spouse maintenance, or urgent spouse maintenance.

Cases will not qualify as a PPP Case if:

  1. they involve entities such as a family trust, company, or self-managed superannuation fund the value of which is contested and requires valuation or expert investigation,
  2. only parenting orders are sought,
  3. both parenting and financial orders are sought, or
  4. child support is the issue.

The new Family Law Practice Direction – Priority Property Pool Cases applies. It revokes and replaces the previous Family Law Practice Direction Priority Property Pools Under $500,000, and must be read in conjunction with:

PPP Cases proceed differently to standard cases. The Guide for practitioners in PPP Cases sets out the applicable procedure. Important differences from standard case procedures include:

  • At each court date the parties’ lawyers must inform the judicial registrar of the costs their client has incurred to date, their estimated costs to the conclusion of a final hearing, and the source of the funding for representation.
  • Adjournments are discouraged and will be granted only in exceptional circumstances.

The By Lawyers Family Law Property Settlement publication has been updated accordingly.

Personal injury lists – VIC

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The Supreme Court has introduced new procedures for matters in the personal injury lists.

Changes have been made to first directions orders in the four specialist personal injury lists in the Common Law Division with the intention of increasing efficiency, and reducing delays and adjournments.

Personal injury lists

In the Supreme Court, personal injury claims are dealt with in four specialist lists:

  • Personal Injuries List
  • Dust Diseases List
  • Institutional Liability List
  • Civil Circuit List

New forms for consent orders

Parties submitting minutes of proposed consent orders in these lists must now use the revised First Directions forms available on the Court’s website and on the matter plan in the By Lawyers Personal Injury (VIC) publication.

The major changes to the standard orders include:

  • the ability for the parties to agree to extend or abridge, by consent, the time for interlocutory steps before the post-mediation directions hearing, or, in the case of expedited Dust Diseases List matters, the final directions hearing;
  • time for issuing subpoenas and serving supplementary reports and final particulars of special damages;
  • when supplementary medical and expert reports can be served close to trial; and
  • matters about which the court expects to be informed at the post-mediation directions hearing, including expert evidence.

Practice notes

The personal injury lists are each managed subject to their relevant Practice Note being:

First Directions Hearing

After the defence is filed, the court will contact the parties to arrange a First Directions Hearing.

The court expects a practitioner with conduct of the file, or a good working knowledge of it, to appear at all directions hearings.

The parties are encouraged to submit consent orders to avoid an appearance.

Publication updates

The commentary and matter plan in the by Lawyers Personal Injury (VIC) publication has been updated accordingly.

Subpoena forms and processes – VIC

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Amendments to subpoena forms and processes in the County Court of Victoria commenced on 14 August 2023.

Chapters I and III of the County Court Civil Procedure Rules 2018 are revised as to subpoena forms and processes. The County Court (Chapters I and III Subpoena Amendment) Rules 2023 amend the prescribed civil and criminal subpoena forms.

The Rules now require subpoena recipients to respond using the eCase electronic case management system. The Registrar or Court must grant leave for any physical production. The eCase platform is mandatory for production, inspection, and objections.

The amended civil subpoena forms are:

  • Form 42A Subpoena to attend to give evidence – minor amendment;
  • Form 42AA Subpoena for production to Registrar – substituted form;
  • Form 42B Subpoena to produce – substituted form; and
  • Form 42C Subpoena both to attend to give evidence and to produce – substituted form.

The County Court Criminal Procedure Rules 2019 have also been amended.

The amended criminal subpoena forms are:

  • Form 1D Subpoena to attend to give evidence – minor amendment;
  • Form 1E Subpoena to produce – substituted form;
  • Form 1EA Subpoena both to attend to give evidence and to produce – substituted form; and
  • Form 1I Short service order subpoena – minor amendment.

From 14 August 2023, the Registrar will not issue any subpoenas that are not in the correct form. The new subpoena forms are available from the Victorian County Court website.

The By Lawyers Victoria guides County Court Litigation – Plaintiff and County Court Litigation – Defendant have been updated for the new subpoena forms and processes, including links.

Domestic violence leave – FED

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Family and domestic violence leave entitlements are extended to small business employees from 1 August 2023.

Under the Fair Work Amendment (Paid Family and Domestic Violence Leave) Act 2022 paid leave replaced the previous entitlement to unpaid leave for all non-small business employees from 1 February 2023. That entitlement is now extended to small business employees, so it covers everyone. A small business is one with less than 15 employees.

Full-time, part-time, and casual employees are entitled to 10 days of paid family and domestic violence leave in every 12-month period of employment. It is not calculated on a pro-rata basis for casual employees and is all available up-front, which means a new employee has an immediate entitlement to the full ten days. The leave does not accumulate if not taken.

The leave can be taken for any purpose relating to the impact of family and domestic violence, which might include relocating, attending court, or attending medical, legal, counselling, and financial advice appointments.

Employers cannot include information in an employee’s pay slip identifying the type of leave paid.

Family and domestic violence is defined as violent, threatening, or other abusive behaviour by an employee’s close relative, current or former intimate partner, or a member of their household that both seeks to coerce or control them and causes them harm or fear.

The leave can be taken during a period of personal or carer’s leave, or annual leave.

The notice and evidence requirements of s 107 of the Fair Work Act 2009 apply, including the requirement for the employer to maintain confidentiality: s 106C.

See the Fair Work Ombudsman website for more information.

The By Lawyers Employment Law publication has been updated accordingly.

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