Victorian tax amendments — a mixed bag of changes

Following the State Taxation Further Amendment Bill 2025 receiving Royal Assent on 25 November 2025, the State Taxation Further Amendment Act 2025 (Amendment Act) has now been enacted introducing various changes to Victorian tax laws.

Key amendments introduced affect:

• commercial and industrial property tax — clarifying when land will be eligible to enter the regime;
• New Zealand citizens — new residency tests for foreign purchaser additional duty, the absentee owner surcharge and first home owner grant;
• vacant residential land tax — a new exemption for dwellings that have been renovated or repaired within one calendar year;
• land tax — a new exemption for land containing a non-permanent shelter used as the owner’s residence;
• transfer duty — a new exemption for transfers of dutiable property to custodians; and
• congestion levy — the levy rates are increased and exemptions introduced in respect of retail premises and government schools.

Each of these measures is discussed below.

Commercial and industrial property tax (CIPT)

The CIPT regime, which commenced on 1 July 2024, phases out transfer duty on commercial and industrial property transactions. Broadly, under the Commercial and Industrial Property Tax Reform Act 2024 (CIPT Act), land enters the CIPT regime when an ‘entry transaction’ occurs in relation to the land — this will happen where 50% or more of the property is transacted, either via a dutiable transaction or a landholder transaction.

Once land enters the regime, duty will be payable one final time, and subsequent sales of the land will be exempt from duty (subject to the land still having a commercial or industrial use). Following a transition period of 10 years, the CIPT will then apply annually at a flat rate of 1% of the site value of the land (0.5% for build-to-rent land).

The Amendment Act now amends the CIPT Act to ensure that when land enters the CIPT regime via a dutiable transaction (i.e. a sale), duty must be payable on 50% or more of the dutiable value of the land, without any concession or exemption. This amendment ensures that full transfer duty is payable under the transaction that brings the land into the regime. The effect of this amendment is that where sales transact an interest of 50% or more of the relevant land, but the dutiable value of those sales is reduced (i.e. via the application of any concessions or exemptions), the land will not enter the CIPT regime.

This amendment does not impact property transactions that attract the 50% concession for regional properties used for commercial, industrial or extractive industry purposes.

Anomaly — partitioning and division of land

Similarly, the Amendment Act rectifies an anomaly whereby land could have entered the CIPT regime pursuant to a dutiable transaction under which nominal, or minimal, duty was payable. This could otherwise have occurred pursuant to a partition of land under section 27 of the Duties Act 2000 (Vic) (Duties Act), which operates to reduce duty on a partitioning by virtue of taking into account the beneficial interest already held in the land by a transferee.

The Amendment Act ensures that a dutiable transaction that gives effect to a partition or division of land will only cause land to enter the regime if the duty chargeable equates to the amount that would be chargeable on 50% or more of the land. Consequently, many transactions involving the partitioning of land may not bring land within the CIPT regime.

The amendments apply retrospectively from 1 July 2024.

New Zealand citizens and residency

The Amendment Act amends the Duties Act and Land Tax Act 2005 (LTA) to clarify how foreign purchaser additional duty (FPAD) and the absentee owner surcharge (AOS) apply to New Zealand citizens.

New Zealand citizens have unique arrangements with Australia as they can remain in Australia indefinitely under a special category visa within the meaning of section 32 of the Migration Act 1958 (Cth). However, this visa can create anomalous outcomes because, unlike a permanent visa, a special category visa is granted and ceases every time the person enters and leaves Australia. For example:

• For FPAD — a New Zealand citizen who has been residing in Australia for many years but is not in Australia at the time of settlement of their purchase of residential property would be liable for FPAD — simply because they stepped out of Australia at the time that duty became chargeable on their purchase. Such an individual would also be ineligible for the first home owner grant on this purchase;
• AOS — a New Zealand citizen who does not reside in Australia can avoid the AOS simply by being in Australia on 31 December in the year preceding the tax year.

The amendments ensure that the tax laws apply consistently to New Zealand citizens, and do not trigger unintended consequences as detailed above.

FPAD amendments

Under the new test for FPAD, New Zealand citizens will be exempt from FPAD if they ordinarily reside in Australia for a continuous period of at least 6 months within a period commencing 12 months prior to, and ending 12 months after, the date of the dutiable transaction.

The term ‘ordinarily resides’ refers to the place where, in the ordinary course of a person’s life, they regularly or customarily live, as opposed to where they temporarily or occasionally reside. To determine where a person ordinarily resides, we would expect the State Revenue Office (SRO) to consider factors such as the location of the individual’s family, their business or employment ties, the location of significant assets such as real property, and their social and living arrangements.

AOS amendments

A New Zealand citizen will be exempt from AOS if they ordinarily reside in Australia or if they meet the ‘presence in Australia’ test (i.e. they are in Australia on 31 December in the year immediately preceding the tax year, and for a total period of at least 6 months in that year).

Consequently, only individuals who genuinely live in Australia will be exempt from AOS; the surcharge cannot be circumvented by an individual simply being present in Australia on 31 December in a year preceding the tax year.

The AOS amendments take effect from the 2026 land tax year onwards, with the other amendments taking effect from the day after Royal Assent (i.e. 26 November 2025).

Amendments are also made to the first home owner grant scheme, to ensure that eligibility of New Zealand citizens to access the scheme is based on their residency status, rather than whether they hold a special category visa, to ensure it applies equitably to genuine residents.

Vacant residential land tax (VRLT)

New VRLT exemption

Broadly, the VRLT applies to residential land across all of Victoria that is vacant for more than six months in the preceding calendar year.

The Amendment Act introduces a new exemption for properties that constituted ‘residential land’ at both the commencement and end of a calendar year, but for a period during that year did not constitute residential land, such as when a dwelling was being repaired or renovated.

This exemption ensures that land is not subject to VRLT for a tax year in circumstances where a dwelling undergoes significant renovation or repairs which disable its use for residential purposes, and those renovations or repairs take place entirely within the preceding calendar year. Without this exemption, such land would otherwise be subject to VRLT if it has been vacant for more than six months (due to such works). Accordingly, the VRLT will not be imposed on a residence that was unavailable for occupation for a significant part of the year.

Other VRLT amendments

The Amendment Act also amends the LTA to exclude residential land in Dinner Plain alphine village from VRLT. This change applies retrospectively from 1 January 2025, and impacted landowners who paid VRLT for the 2025 land tax year will be entitled to refunds.

The LTA is also amended to vary the VRLT notification deadline from 15 January to 15 February each calendar year, which provides owners with additional time to comply with their notification obligations.

The VRLT amendments take effect from 26 November 2025 for the 2026 land tax year (other than the Dinner Plain village exclusion which takes effect from 1 January 2025).

Land tax

New land tax exemption

The Amendment Act introduces a new exemption for land containing a non-permanent shelter used as the owner’s residence, for situations when the principal place of residence (PPR) exemption from land tax does not apply.

New sections 63A to 63H of the LTA provide for a new land tax exemption for land with a temporary residence. ‘Temporary residence’ is defined to include any structure or vehicle that is capable of human habitation, and which does not require an occupancy permit from the relevant municipal council. The definition includes the following examples: caravan; motorhome; trailer; tent; shed; or barn.

For the purposes of this exemption, land is ‘temporary residence land’ if:

• there is a temporary residence on the land;
• there is no building affixed to the land for which an occupancy permit is required, including any building that is being constructed or renovated;
• the land is not used to carry on a substantial business activity;
• the land is in a zone other than a non-residential zone;
• the site value of the land is less than $300,000; and
• the owner of the land does not own any other land in Victoria.

Such ‘temporary residence land’ will be exempt from land tax if it is used and occupied as the PPR of a natural person. For trust-owned land, the exemption extends to land used and occupied as a PPR of a vested beneficiary (unless rent is paid by the beneficiary).

The exemption only applies to land with a site value of less than $300,000, so that it will have a somewhat narrow application. Interestingly, owners of such properties previously benefitted from the tax-free threshold of $300,000, and would have been excluded from land tax on that land in any event. You may recall that from 1 January 2024, the Victorian Government reduced the tax-free threshold from $300,000 to $50,000 for the next 10 years. Until the original threshold is reinstated, this new exemption provides relief to affected landowners.

This exemption does not apply to homes that are being constructed or renovated; section 61 of the LTA provides a separate exemption for such properties.

The new exemption takes effect from 26 November 2025 for the 2026 land tax year.

Hardship

The Amendment Act also amends the LTA to raise the threshold for the Land Tax Hardship Relief Board to consider applications from $1,000 to $5,000 and removes the requirement for the Treasurer to approve the Commissioner’s grants of relief. This amendment commenced from 26 November 2025.

Transfer duty

New custodian exemption

The Amendment Act introduces a new transfer duty exemption for certain transfers of dutiable property involving a custodian or sub-custodian in relation to a trust. Such transfers often arise where a trustee of a trust appoints a custodian or a sub-custodian to hold trust property, or an existing custodian retires and the trust property must be transferred back to the trustee.

The new exemption in section 35A of the Duties Act applies to ‘internal’ transfers of dutiable property that occur between different entities involved in the administration of a pre-existing trust. The exemption reflects the fact that the transfer of property merely involves a change in the identity of the entity which holds the legal title to trust property, and there is no change in the underlying beneficial ownership of that property.

The amendment commenced from 26 November 2025.

Congestion levy

The Amendment Act implements the changes to the congestion levy which were announced in the Victorian State Budget 2025-26, with the amendments commencing from 1 January 2026.

The Amendment Act increases:

• the Category 1 rate from $1,750 to $3,030 per leviable parking space; and
• the Category 2 rate from $1,240 to $2,150 per space.

The Amendment Act expands the Category 2 area boundary to include additional inner-eastern suburbs including Burnley, Cremorne, South Yarra, Windsor and parts of Richmond, Abbotsford and Prahran in proximity to Chapel Street, Bridge Road, Swan Street, Victoria Street, Hoddle Street and Punt Road. The Amendment Act also moves the area surrounding the Queen Victoria Market from the Category 1 area to the Category 2 area.

New exemption and concession

The Amendment Act introduces new section 26A of the Congestion Levy Act 2005 (CLA), which provides a 50% levy reduction in respect of parking spaces located on, or adjacent to, retail premises or retail shopping centres in the Category 2 area, if those parking spaces are provided free of charge for the first 60 minutes, or provided free of charge to customers who make a purchase at the premises, and are exclusively set aside for retail customer parking.

New section 18AA of the CLA provides an exemption from the levy in respect of parking spaces located on the premises of a government school or on government school boarding premises, if those parking spaces are provided without charge.

The Amendment Act also improves administration of the levy, by excluding exclusively residential parking spaces from the levy framework, which then removes the requirement for private individuals to register for the congestion levy if they exclusively own residential parking spaces (which are exempt from the levy). This amendment takes effect from 1 January 2026.

Other amendments

Other amendments include the following:

• The Building Act 1993 is amended to establish a clear calculation method for the building permit levy, particularly in relation to cost-plus contracts and owner-builder scenarios. The Amendment Act also identifies which additional information must be included in an application for a staged permit.
• The Domestic Animals Act 1994 is amended to increase amounts payable by Councils to the Treasurer in respect of dog and cat registration fees and by Greyhound Racing Victoria to the Treasurer in respect of greyhound registration fees.

Comment

The reforms introduced by the Amendment Act are significant.

The amendments to the CIPT regime are complex. Because the amendments will apply retrospectively, this may have implications for land which has already entered the regime, and was deemed to be CIPT land at that time, and assessed to final stamp duty. Such land may potentially have since been transacted as a duty-free transaction; we have seen various properties which have already entered the regime and have since transacted on a duty-free basis. Purchasers of such land, who were assessed to nil duty (as the land was already CIPT land), may now be liable for full transfer duty on that acquisition if the property was not in fact eligible to enter the regime under the new measures. If you consider that your land transaction may be impacted by this measure, please contact us and we can review this matter.

The introduction of various amendments for transfer duty, VRLT and land tax are welcome, although we note the new land tax exemption may have limited application due to the condition stipulating that the site value of the land must be less than $300,000.

The new tests for New Zealand citizens will prevent anomalous outcomes occurring under the FPAD, AOS and first home owner provisions. However, the issue of residency is complex, and New Zealand citizens may need to seek legal advice to confirm their residency status for this purpose, particularly if they travel frequently overseas.

Contact us

We can review your entitlement to the various new exemptions and review your current arrangements in respect of your landholdings. The SRO is active in its investigations, and will no doubt commence to review CIPT transactions to determine if any sales were in fact ineligible to enter the regime. For this reason, we recommend that clients keep abreast of these new developments and we can assist in this regard.

If you would like to discuss the above measures, please contact Tamara Cardan, Special Counsel, on +61 3 9321 7862.