The Victorian Government has updated the Sale of Land Act 1962 with a new rule (Section 10G) that affects property sales. Here’s what you need to know:
From 1 January 2024, there is a prohibition on recovery of land tax, which means no more land tax for most Victorian buyers
If you’re buying a property for less than $10 million, you no longer have to pay any part of the seller's land tax. Previously, buyers might have been asked to help cover the seller's land tax as part of the sale agreement, but that’s no longer allowed.
When were the changes made to the Sale of Land Act, 1962?
In the closing months of 2023, the Victorian Government pushed through amendments to the Sale of Land Act 1962 (“The Act”), inserting a new Section 10G. This new Section applies to all Contracts of Sale with a purchase price of less than $10m.
Section 10G (1) - No more land tax adjustments in Victoria at settlement
From 2024 onwards, when you finalise the purchase (settlement) of a new property, the adjustment statement won’t include land tax. This means you don’t need to worry about land tax being added to the final amount you owe.
Section 10G (1) of the Act prohibits a vendor (and negates any clause in a Contract of Sale) from requiring the purchaser to pay an amount of or contribute towards any land tax liability that a vendor may be liable for under the Land Tax Act 2005.
Accordingly, purchasers and vendors should be aware that land tax is no longer able to be adjusted at settlement. A statement of adjustments should not include any amount for land tax for Contracts entered into on or after 1 January 2024.
Getting a land tax clearance certificate is still essential for buyers.
Even though buyers don’t have to pay the seller's land tax anymore, it’s still important to get a land tax clearance certificate. This ensures that any unpaid land tax by the seller is taken care of before the sale is completed. If it’s not, the new owner (you) might still end up responsible for the seller's unpaid land tax.
So, it’s still important to obtain a land tax clearance certificate as part of the adjustment process, ensuring that the vendor pays any outstanding liability for land tax at settlement. Land tax is still a first charge on land pursuant to section 96 of the Land Tax Act 2005.
If the Vendor’s land tax liability is not paid at settlement (by the vendor), then the Land Tax becomes the purchaser’s responsibility.
Section 10G (2) - Ensuring contracts are accurate and do not request sellers to cover any element of land tax.
Sellers need to ensure that sale contracts after 1 January 2024 do not include any terms requiring buyers to pay the seller's land tax. Buyers should also double-check their contracts before signing anything.
As referred to above, the new Section 10G (2) of the Act prohibits clauses in a Contract of Sale that require a purchaser to pay any amount of or toward the vendor's land tax liability.
Accordingly, owners wanting to sell need to be careful to ensure that any Contract of Sale after 1 January 2024, does not contain a term requiring land tax to be adjusted and paid for by the purchaser.
These changes are designed to protect property buyers from having to pay any part of the seller's land tax, simplifying the costs associated with purchasing property. However, to avoid any future liability, it’s imperative to make sure that the seller’s land tax is settled at the time of purchase.
For further information, please follow the link below:
Land Tax - FAQs (State Revenue Office)
