• Home
  • /
  • Property Alert: Real Estate Vendors to Bear More Land Tax under Proposed Changes

Property Alert: Real Estate Vendors to Bear More Land Tax under Proposed Changes

Oct 12, 2023

From 1 January 2024, vendors will no longer be able to apportion land tax between themselves and purchasers under a contract of sale of land, under proposed changes to the Sale of Land Act 1962 (Vic) (Act).

This change is part of the State Taxation Acts and Other Acts Amendment Bill 2023 (Bill) which was introduced to the Parliament of Victoria on 3 October 2023.

The Land Tax Prohibition

In Victoria, adjustment of land tax (on a single-holding basis) at settlement of a property is a long-accepted industry standard.

Just like other periodic outgoings (including Council rates), apportionment enables the vendor’s land tax to be divided between the vendor and purchaser at settlement.

If the Bill becomes law, any clause in a contract of sale of land that requires the purchaser to pay an amount “for or towards tax for which the vendor is or may become liable in respect of the land under the Land Tax Act 2005” will be void.

This prohibition applies to both current and future land tax liabilities of the vendor.

The prohibition covers all types of contracts of sale of land, including off-the-plan, existing residential, commercial and vacant land contracts.

The Bill also introduces a new civil offence for vendors who sign a contract of sale containing the prohibited provision.

Based on current calculations, vendors could face a fine of $11,538 for individuals and $57,693 for company vendors.


The proposed prohibition will come into effect from 1 January 2024.

The Bill does not currently specify whether the proposed prohibition will apply to contracts made before that date.

However, the second reading speech for the Bill indicates that the proposed prohibition will apply to contracts of sale signed on or after 1 January 2024.

(Un)intended consequences?

During Bill’s second reading, it was noted that the current practice of apportioning of land tax can reduce transparency, as the apportioned land tax is not directly reflected in the purchase price.

Even so, the proposed change may have potentially significant consequences and risks for both purchasers and vendors.

Deviation from Industry Standards

Victorian standard form contracts of sale of land include land tax adjustments as a general condition.

These standard contracts are ubiquitous and widely favoured by estate agents and conveyancers.

Given the property industry’s historical reliance on these standard contracts, it is likely that they may continue be used well past the proposed commencement date.

In those circumstances, vendors may not have considered the inability to recover land tax in agreeing to the sale price and could also face penalties. 

Unpaid Land Tax - A Risk for Purchasers

The current practice of apportioning land tax can be advantageous for purchasers.

When land tax is apportioned at settlement, any outstanding land tax is paid directly to the State Revenue Office (SRO).

Failure to do so may expose the purchaser to unpaid land tax, including interest and penalties.

The SRO Commissioner has the authority to recover unpaid land tax from any occupier of the land, including subsequent purchasers, tenants, or mortgagees.

Further, the Commissioner can place a first charge on the land for any unpaid land tax, in priority over all other encumbrances, such as mortgages.

By prohibiting land tax apportionment, the vendor may have less incentive to pay land tax at settlement. This is particularly concerning for purchasers if, after settlement, the vendor becomes insolvent.

Unless the purchaser specifically negotiates a contractual protection requiring payment of land tax at settlement, the purchaser may be liable for any land tax a vendor fails to pay.

Defaulting Purchaser – A Risk for Vendors

The prohibition has potential consequences for vendors as well.

Land tax assessments are based on the vendor’s land holdings as at 31 December each year.

So, if a settlement is due on 27 December, and the purchaser defaults and does not settle until 2 January in the following year, the vendor will be liable for an entire year’s land tax.

To guard against this risk, currently a contract of sale can include protections to require a purchaser to pay an amount equivalent to the expected land tax liability in addition to the price at settlement.

The proposed prohibition renders such contractual protections void, leaving vendors with limited recourse for recovery of such additional costs.

The Future

In Victoria, the scope and extent of land tax continue to expand.

A recent parliamentary inquiry examined whether land tax could serve as a viable alternative to the current transfer (stamp) duty regime in Victoria.

While some consider transfer duty to be an inefficient and inequitable tax, the proposed prohibition on recovering land tax could itself have unfair consequences for unsuspecting purchasers and vendors.

If this change becomes law, vendors and purchasers must carefully review all contract of sale of land and take steps to reduce their risks. 

More Information

For more information, please contact a member of our Property team:

Morgan Scholz, Head of Property
(03) 8600 8890 or mscholz@kcllaw.com.au

Mark Yaskewych, Principal Lawyer
(03) 8600 8830 or myaskewych@kcllaw.com.au

Geoff Kliger, Senior Special Counsel
(03) 8600 8815 or