Victoria has introduced several new land tax changes and hikes that some experts warn could cause an investor exodus. Financial and real estate experts are concerned that with the changes being introduced by Premier Jacinta Allan, investors may opt to invest their capital in more favourable jurisdictions.
Amongst the key changes is an expansion of the vacant residential land tax across the state by January 2025. Currently, the tax applies to vacant residential properties in the inner and middle suburbs of Melbourne. This tax is being applied at a rate of one per cent on the total value of the property, including any structures already built and affects properties that have been vacant for at least six months out of a year.
Residential land that is left undeveloped for more than five years within established zones in Melbourne will also be charged an additional one per cent tax as of January 2026.
According to Treasurer Tim Pallas, this move is intended to send a clear message to property owners that they must either develop the land or sell it to investors who can. He said the state could not afford to have undeveloped land in Melbourne just sitting around idle for years. Pallas added that this standard would also be applied to government-owned land as well. Government agencies holding idle land will be required to justify why the properties should not be put on the market.
These announcements have however caused concern with experts like the Property Council’s executive director, Cath Evans, who said that she was shocked by the comments and questioned why there was no mention of the reforms when the government recently signed an affordability partnership with the sector. Evans said that there was an understanding that there would be consultation with any reforms that affected the housing supply.
Shadow minister for Home Ownership and Housing Affordability, Evan Mulholland, also lamented the new tax changes, stating that this would make it harder for more Victorians to achieve their dream of home ownership. He said the changes would drive away critical investment and housing supply. He is urging the government to instead reduce taxes to make homes more affordable.
Another change will see property buyers no longer able to pass on land or windfall gains tax to sellers. The state also announced a consumer-facing 7.5 per cent levy that will target short-term accommodation bookings such as Airbnb. Holiday home, investment, and business property owners will also begin to pay a $1,300 extra land tax as of January.
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