‘Disgusted’: Truth about shock new Victorian tax

An expert has warned some Aussies won’t be exempt from Victoria’s new tax, despite the government insisting they won’t be hit.

Treasurer Tim Pallas announced the Vacant Residential Land Tax at a property industry function on Tuesday, which will see owners of homes left unoccupied for more than six months taxed in an attempt to ease housing pressures.

The measure, which came as a surprise to Assistant Treasurer Danny Pearson, will extend the current tax applied to properties in Melbourne to empty properties and undeveloped land across Victoria from 2025.

“Existing exemptions will continue to apply statewide, including to holiday homes, properties recently acquired or regularly occupied for work purposes, and properties being built or renovated,” the government said in a media release.

However, Andrew Spalding, a tax partner at Mills Oakley, warned an exemption would not apply to those with two or more holiday homes, or homes held in family discretionary trusts.

“The extension of the VRLT announced by Tim Pallas is going to catch quite a few holiday home owners by surprise,” Mr Spalding told the Australian Financial Review.

“Holding holiday homes in family discretionary trusts is done for legitimate commercial reasons. For example, individuals exposed to risk, like directors or lawyers and doctors, or for intergenerational family succession planning.”

Mr Spalding said holiday home owners will need to consider distributing their holiday homes out of their trusts to themselves. However, he said it would trigger a capital-gains tax liability.

‘Disgusted’ by lack of engagement

Mr Pallas’ announcement was met with surprise on Tuesday, with media reports suggesting newly appointed premier Jacinta Allan was unaware of the new tax.

“If the Premier didn’t know she should sack the treasurer if he’s just now freewheeling about tax rises,” Sky News host Paul Murray said on his show on Tuesday night. “That is a bad start to a new government.”

Ms Allan later insisted in parliament that she was across the details, however Murray said “multiple members of staff did not know”.

Real Estate Institute of Victoria CEO Quentin Kilian also said he was “disgusted” they had not been engaged about the tax.

“They might have changed leaders, but the approach is the same – they start with the premise of punishing taxpayers,” he told the Australian Financial Review.

Others expressed fury over the decision.

Talkback host Tom Elliott from 3AW slammed the measure, asking: “When is the government going to realise that new taxes are not always the answer?”

The timing of the move and the fact that no-one expected it, including in the government, was telling, Elliott added.

“Another day, another new tax in Victoria.”

‘Nervous’ farmers erupt over tax

Holiday homeowners won’t be the only ones impacted by the next tax.

Victorian Farmers Federation president Emma Germano told 3AW’s Neil Mitchell her members are “getting very, very nervous”.

“There’s plenty of farm houses that are reserved for seasonal workers that might only come in and use them for three months of the year, but you need to have them vacant because you can’t get accommodation anywhere else,” she said on Wednesday.

“We don’t know whether or not that [means the tax] applies to us.

“If it was to apply to rural land, how do you tell the difference from what’s vacant and what’s just having a rest from having sheep or cows on it. Sometimes we take our animals off so the grass can go again.”

It was recently revealed Victorians pay more tax per person than anywhere else in the country – an average of $5638, according to Australian Bureau of Statistics data.

Currently, a tax is imposed on unoccupied dwellings across Melbourne’s inner city and middle-ring suburbs in 16 council areas. That levy is forecast to generate $37 million a year.

From 1 January 2025, the tax will apply to the whole state and take in vacant land. A levy of one per cent of the value of the empty home or undeveloped land will apply.

“We know the best thing you can do to make homes more affordable is supply more of them – this is all about freeing up empty houses for rent and vacant land for new homes, particularly across the outer suburbs and regional Victoria,” said Mr Pallas.
The government is expected to introduce legislation to parliament on Thursday.