This article is from the Australian Property Journal archive
IN the same week that its Treasurer took his own ministers and the property industry by surprise with the announcement of a new tax on vacant and undeveloped properties, the Victorian government revealed changes will also be made to the windfall gains tax as part of the new legislation.
The government’s windfall gains tax charges 50% on any increase in value landowners often see when their properties are rezoned to residential. Treasurer Tim Pallas revealed that the legislation will aim to prevent developers from passing on the costs of land tax and windfall gains tax to homebuyers, often by classifying it as an item in sales contracts.
The state budget estimates that about $40 million will go to the state’s coffers from the change this financial year.
Pallas shocked the industry and his own cabinet ministers on Tuesday when he said new legislation would expand the tax of vacant residential land across the state.
Through the expanded tax the government is hoping to incentivise owners to rent out empty homes or develop long-term vacant land, to help drive up supply amidst the ongoing housing crisis.
With residential land undeveloped for more than five years in established areas of Melbourne to be liable, the changes will apply to an estimated 3,000 undeveloped properties from the start of 2026.
Pallas announced the proposed vacant residential land tax (VLRT) policy at a Property Council of Australia conference on Tuesday.
From government sources who could not speak publicly, Australian Property Journal learned that Premier Jacinta Allan and the Assistant Treasurer knew nothing about the tax.
One government source told APJ that cabinet ministers also only learned of the new proposed tax from media reports.
A senior government source added, “Pallas has gone rogue”.
Release of the bill shows that the commissioner of state revenue will have significant discretion and can grant exemptions from the tax if the land is intended to be solely or primarily used or developed for non-residential use, and if there is an “acceptable” reason for the land not yet being used or developed in that way.
“While the release of the Bill provides some clarification on elements of the proposed VRLT expansion, the Property Council remains concerned about key aspects of the proposed frameworks of these changes, and their potentially adverse impact on housing supply and affordability,” the Property Council said yesterday.
“The expansion of VRLT on undeveloped land relies heavily on discretion of the commissioner of state revenue to determine exemptions for undeveloped land where development has been constrained for a variety of external reasons.”
This week, the Property Council was scathing of Pallas and the new Allan government.
“Don’t do a Victoria’,” said the Property Council’s chief executive Mike Zorbas.
“Don’t go slow on housing and approvals for the past few years and then seek redemption through a partnership with industry that you set on fire inside a fortnight.
“The Victorian planning improvements and targets from last fortnight are needed and welcome, but this week’s hidden tax grabs are a major trust-burner.
“Chaotic? Intentional? Government spare change amounts only?
“Doesn’t matter. Burning through the trust. Always a bad way to start a partnership.” said Zorbas.
Meanwhile the Victorian government said it has received more than 100 enquiries from industry partners looking to be part of its plans to deliver more than 800,000 new homes over the coming decade, as part of its recently announced Housing Statement.
