Victorian treasurer Tim Pallas released his 9th straight state budget, which has some very interesting news which is sure to have a big impact on investors and renters across Victoria.

The government announced that they would be cutting the tax-free threshold for land tax, as well as changing the additional annual payment.

Here’s what is changing when it comes to land tax in Victoria:

• The tax-free threshold on land tax will be cut from $300,000 to $50,000. This tax will apply to holiday homes and rental properties, not primary residences, and will affect approximately 380,000 property owners who were previously not paying any tax on their investment.
• Additional annual payment of $500 for properties valued between $50,000-$100,000.
• Additional annual payment of $975 for properties valued between $100,00-$300,000.
• Properties exceeding $300,000 in value will pay the $975 annual payment plus an additional 0.1% of the value of the land over the threshold.
• These new laws are coming into effect on January 2024.

While this may seem like bad news for those with one or multiple investment properties (and subsequently renters who may feel the sting of increased rental prices), many of these new payments will be tax-deductible on a federal level, especially if you’re negative gearing your property.

In fact, approximately 35% of investors will be able to claim the expense under negative gearing through the federal government. There are also some investors who may be able to claim the tax as a deduction, even if they’re not negatively gearing their property.

“I’d encourage anybody who can lawfully, legally make claims against that federal tax system to do so. I’m sure that accountants will provide advice to that end,” said Premier Dan Andrews. “It does depend on the individual circumstances, how you have things structured, but those costs are tax deductible. That’s the advice I have and I’m sure that people will make those claims.”

If you need some clarity on the new Land Tax changes, or want any advice about investment properties, negative gearing, and what you are able to claim, contact the team at Barry Plant Bendigo, Ballarat, and Maryborough for expert advice.