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Land Tax and Windfall Gains Tax - What do the changes to the Sale of Land Act mean?

Property Law: 19 October 2023

Author: Rob Bradley & Anisha Goyal - Our People

The State Taxation Acts and Other Acts Amendment Bill 2023 (“Bill”), introduced into the Parliament of Victoria on 3 October 2023, proposes several amendments to Victoria’s taxation laws.

Land Tax and Windfall Gains Tax - What do the changes to the Sale of Land Act mean?

Most importantly for Victorians buying or selling land, if enacted without amendment, Part 6 of the Bill (which introduces sections 10G and 10H into the Sale of Land Act 1962 Vic) will impact upon the way in which liability for land tax and windfall gains tax is shared between vendors and purchasers.

Those sections will:

  1. render void a provision in a contract of sale of land which requires the purchaser to pay an amount towards:
    1. land tax for the current or any previous year; or
    2. an existing windfall gains tax liability which has been specified in a notice of assessment; and
  2. prohibit a vendor from:
    1. entering into a contract which purports to require the purchaser to pay an amount towards land tax for the current or any previous year; or
    2. granting an option to purchase or entering into a contract which purports to require the purchaser to pay an existing windfall gains tax liability; (penalties apply of up to 60 penalty units for individuals and 300 penalty units for companies).

The prohibition in (b) above will only apply to documents executed after 1 January 2024 however provisions relating the land tax and windfall gains tax in contracts executed before that date which settle after that date, may be rendered void by the changes outlined in (a) above.

The Minister’s second-reading speech advised that the changes are being made because:

  1. adjusting land tax at settlement can lead to purchasers paying land tax when often little or no land tax liability is applicable to them once the property has been transferred; and
  2. the practice reduces transparency because any extra amount payable for land tax and windfall gains tax will not be directly reflected in the purchase price.

Two criticisms of this rationale are immediately apparent:

  1. a purchaser might have had the same (or even, a greater) land tax liability as that of the vendor but will now not be required to make any contribution; and
  2. the Bill does not seek to regulate the adjustment of municipal rates and water charges which remain as apportionable expenses.

The Bill will also create difficulties for land owners who sell their property to developers under long term contracts. Developers typically require the ability to investigate the property, apply for permits and undertake preliminary infrastructure works before settlement. Doing so can cause the land owner to lose the primary production exemption from land tax. To ensure that developers remain liable for their actions, such contracts of sale typically require the developer/purchaser to pay land tax from the day of sale. Under the Bill such provisions will be prohibited – probably resulting in some land owners refusing to allow access before settlement and delaying development.

Another consequence of the Bill will be to prevent vendors from recovering, as an adjustment to the price at settlement, any land tax to which the vendor has become liable solely because the purchaser defaults under the contract by not settling the purchase before 31 December. If a purchaser does not settle on time and settlement is deferred to the new year, the vendor will be obliged to pay land tax for the whole of the new year. The vendor’s only redress would seem to be a court action seeking damages.

Ideally the Bill should be amended to avoid these consequences.

Anisha Goyal, Graduate Lawyer
Rob Bradley, Principal Lawyer


On 18 October 2023 the SRO advised the Law Institute of Victoria that:

“ … under principles of statutory interpretation there is a presumption that legislation is not retrospective unless the legislation provides for it with reasonable certainty. As currently worded, the proposed new provisions show no indication of an intent for them to apply retrospectively, and … the second reading speech shows the clear intention that the proposed new provisions will only apply to contracts signed on or after 1 January 2024. Accordingly, the presumption against retrospective application would apply when interpreting new sections 10G(1) and 10H(1) and (3) such that the provisions would be taken to apply only to contracts entered into on or after the commencement of the amendments on 1 January 2024 and would not be taken to alter or affect contracts that were entered into before that date.”

On the other hand in each of s.10G & s.10H a clear distinction is drawn by the wording of the sub-sections between entering into a contract (which you is forbidden and punishable AFTER January) and making an adjustment whereby the purchaser is required to contribute an amount in respect of Land tax (or WGT) which is prohibited without any mention of a date.

Contrary to the SRO advice, it is arguable that, “As currently worded, the proposed new provisions show” one activity is prevented after the stated date whilst the other is simply prohibited – i.e. from the moment the Act is passed.

Ideally the Bill should be amended to avoid this uncertainty.

Photo by Tierra Mallorca on Unsplash

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