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
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.