The Victorian Government has increased transparency for purchasers of property in Victoria. The State Taxation Acts and Other Acts Amendment Act 2023 (Vic) prohibits vendors of properties in Victoria from passing on land tax obligations to purchasers – a practice that was previously common to most property transactions in the State (and indeed nationally).

Key takeaways for participants in the Victorian property market and their representatives are as follows:

• the practice of ‘adjusting’ for a vendor’s land tax liabilities is now prohibited – a vendor must not compel a purchaser to adjust for its land tax liabilities;
• provisions in contracts of sale that purport to compel the adjustment of land tax are unlawful and of no effect, and vendors who enter into contracts that include such provisions, are liable for substantial civil penalties;
• the changes only apply to contracts entered into and options granted from 1 January 2024;
• contracts entered into after 1 January 2024 are exempted if they are entered into under the exercise of an option that was granted before 2024;
• the changes also apply to a vendor’s liabilities for Windfall Gains Tax;
• the changes only apply to contracts under which the purchase price for the land is less than $10,000,000 (which figure will be adjusted annually in accordance with CPI, commencing from 1 January 2025). Parties to contracts exceeding that amount may adjust for the vendor’s land tax liabilities;
• the practice of adjusting for other outgoings is not impacted.

Vendors who have had a property for pending sale over the holiday period should consult with their representatives and arrange appropriate amendments to their contract of sale. Recommended amendments have been published by the Law Institute of Victoria and are available online, and it is understood that changes to the Law Institute of Victoria standard form contract of sale are in the process of being finalised.

More information about the changes can be found on the State Revenue Office’s website: https://www.sro.vic.gov.au/publications/changes-state-taxes-december-2023