By Craig Gibson, Partner, Tess Jager, Senior Associate, and Elinor Riley, Associate
On Wednesday 15 October 2025, the Victorian Government introduced the State Taxation Further Amendment Bill 2025 (Vic) (Bill). The Bill serves to clarify and expand various tax laws and addresses drafting issues which have historically caused anomalous outcomes for taxpayers. In this article, we outline the key features of the Bill and the implications of such changes for taxpayers.
We also set out below a short summary of the recent High Court decision in G Global v CSR; Stott v The Cth & Anor [2025] HCA 39. This is a rare example of the overlap between constitutional law and the imposition of state taxes.
In 2024, the Commercial and Industrial Property Tax (CIPT) regime was introduced to transitionally abolish stamp duty on commercial and industrial property in Victoria. Once land becomes subject to the CIPT regime (becoming “tax reform scheme land” via an “entry transaction”), subject to some exceptions, stamp duty is no longer imposed on future transactions – instead, after 10 years, an annual levy (separate to land tax) is to be imposed, based on the site (unimproved) value of the land.
The Bill proposes changes to the Commercial and Industrial Property Tax Act 2024 (Vic) (CIPT Act) and the Duties Act 2000 (Vic) (Duties Act) to clarify the circumstances under which land becomes tax reform scheme land.
Currently, several requirements must be met for commercial and industrial land to enter the CIPT regime. One such requirement sees transactions that are exempt from stamp duty under the Duties Act not entering the CIPT regime. However, there are some circumstances where duty is reduced other than by virtue of an exemption, including where dutiable value is reduced because of a partition of land. In such circumstances, the relevant land may enter the CIPT regime even though minimal or no duty has been paid on such transaction (i.e. the Government has not received the ‘final’ stamp duty payment).
The amendments to the CIPT legislation proposed in the Bill aim to narrow the above entry test so that transactions involving a direct transfer of commercial or industrial land will only be considered an entry transaction where duty is payable “on 50% or more of the dutiable value of the land” (where “dutiable value” is broadly tied back to the relevant definition in the Duties Act).
Because the Government considers the current position an unintended anomaly, the amendments will apply retrospectively from 1 July 2024 (the commencement of the CIPT regime) which may result in the reclassification of certain land previously deemed to be tax reform scheme land. This may also mean that certain transactions which enjoyed an exemption from duty – relying on the land being tax reform scheme land at the time (i.e. the sales after the land entered the CIPT regime) – could face reassessment, given the criteria for entry into the regime will be retrospectively adjusted.
If you believe that land you transacted after 1 July 2024 may be impacted, please reach out if you would like advice on the possible impacts of the retrospective legislative amendments.
While the proposed amendments make headway in aligning the policy intent of the CIPT regime with the practical and commercial structuring considerations of land-based transactions, in our view there is still work to be done in ensuring the regime operates as intended, with various anomalies in the current legislation being identified in practice (as is common with legislative regimes in their relative infancy).
The Bill proposes welcome amendments to the Duties Act and the Land Tax Act 2005 (Vic) (Land Tax Act) to clarify how foreign purchaser additional duty (FPAD) and the absentee owner land tax surcharge (AOS) will apply to citizens of New Zealand.
Currently, New Zealand citizens that hold subclass 444 visas are excluded from the definition of “foreign person” under the Duties Act and the definition of “absentee natural person” under the Land Tax Act. However, unlike other visas, subclass 444 visas cease when the New Zealand citizen leaves Australia (even temporarily), and are automatically regranted on return to Australia.
In a duty context, this quirk gives rise to two key anomalies:
In a land tax context, the current wording of the Land Tax Act may result in New Zealand citizens who do not ordinarily reside in Australia, but are in Australia at midnight on 31 December in the year preceding the land tax year (being the relevant taxing point for land tax purposes), being excluded from the AOS.
The amendments proposed to the Duties Act and the Land Tax Act are aimed at disposing of the above anomalies by tying the test of whether a New Zealand citizen is foreign to their residency in Australia more generally, rather than to whether they hold a subclass 444 visa at the relevant taxing point. That is, following the commencement of the proposed amendments, to avoid being considered a foreign person under the Duties Act (and therefore, to avoid the imposition of FPAD on dutiable transactions involving residential land) a New Zealand citizen must reside in Australia for not less than six months continuously between the period commencing 12 months prior to the transaction and ending 12 months after the transaction (thereby aligning the position of New Zealand citizens with other foreign residents).
Similarly, to avoid being considered a “natural person absentee” under the Land Tax Act, a New Zealand citizen must ordinarily reside in Australia or, where they are not an ordinary resident, they must:
Despite being categorised as an anomaly, the above changes are not intended to be retrospective (and will commence one day after the date of Royal Assent). This means that New Zealand citizens who paid FPAD historically under the anomalous circumstances will not be entitled to a refund for earlier years. It also means that New Zealand citizens who have entered into a Contract of Sale that has not yet settled should carefully consider the impact of the changes on such transactions, and strategically navigate the timing of their settlement relative to the best outcomes under the current and/or proposed FPAD regimes.
Vacant Residential Land Tax (VRLT) continues to be a hot topic in the Victorian tax landscape, as the Bill proposes to introduce a number of common-sense changes to the Land Tax Act in respect of the controversial regime.
VRLT notification date
Notably, the Bill pushes back the VRLT notification date from 15 January to 15 February each year.
Currently, Victorian landowners must notify the SRO in writing by 15 January if residential land they own was vacant in the previous year (and/or if any VRLT exemptions apply to their land). Failure to notify the SRO by the 15 January deadline may result in penalties being imposed.
The current January deadline is impractical, given most taxpayers and their advisers are away during the holiday period. The delayed notification deadline is therefore a welcome change which will undoubtedly see increased notification compliance by taxpayers.
New VRLT exemption
Under the current VRLT provisions, land which contains a habitable dwelling on both 1 January and 31 December in the year preceding a land tax year must be occupied for a period of six months during that year, to avoid VRLT. It is irrelevant under the current law whether the dwelling was in fact uninhabitable at any point during the calendar year, such that the occupancy requirement could not be met.
The taxpayer in the recent VCAT proceeding Zheng v Commissioner of State Revenue (Review and Regulation) [2024] VCAT 1173 experienced the consequences of this strict interpretation the hard way, being subject to VRLT despite renovating their property for much of the calendar year.
A new exemption from VRLT proposed in the Bill seeks to rectify the above issue, by ensuring VRLT is not imposed on a residence that was uninhabitable (whether due to construction / renovation or otherwise) at any time during the year preceding the relevant tax year. No minimum period of construction or uninhabitability has currently been proposed, a position we understand has been adopted to simplify administration and maintain consistency with other VRLT exemptions.
The new exemption will operate alongside the existing VRLT exemption for construction / renovation being undertaken on residential land for a longer period, and will take effect from the date after Royal Assent for the 2026 land tax year.
Retrospective exclusion of land located at Dinner Plain from the VRLT regime
Finally, the Bill proposes to amend the Land Tax Act to retrospectively (from 1 January 2025)
reclassify land located in the Dinner Plain Alpine Village such that it is excluded from the VRLT regime.
We understand that the SRO will identify and contact exempt Dinner Plain landowners who paid VRLT in 2025 to arrange refunds once the Bill has been passed.
The principal place of residence exemption from land tax is also proposed to be extended under the Bill, to provide relief to owners of land with a taxable value of less than $300,000 (and no other land) who permanently live on such land in a temporary structure, such as a caravan or tent.
The new provisions are set to come into effect from the day after Royal Assent (therefore applying from the 2026 land tax year), and will also apply to low-value land used by a vested beneficiary of a fixed trust.
The Bill introduces a specific duty exemption for administrative trust arrangements involving transfers of bare legal title between trustees and custodians. The new exemption will cover transfers as part of the appointment or change of a custodian, a transfer back to the trustee or appointment of a sub-custodian or nominee.
While practically the SRO already treats custodian transfers as exempt, the introduction of a specific exemption in the Duties Act will be welcomed by many industries, as it specifically provides for multi-level custodian arrangements.
The new duty exemption will commence the day after Royal Assent.
Finally, under the Bill, the Congestion Levy Act 2005 (Vic) (Congestion Levy Act) is also set to undergo some changes, including:
All changes to the Congestion Levy Act will apply from 1 January 2026.
Also on 15 October 2025, the High Court handed down its decision in G Global v CSR; Stott v The Cth & Anor [2025] HCA 39, putting to bed once and for all the arguments around the Constitutional validity of imposing foreign state tax surcharges in circumstances where the relevant foreign tax treaty prohibits the imposition of taxes which would not otherwise be imposed on Australian citizens or resident companies / trusts.
The High Court held that the Commonwealth Parliament’s insertion of section 5(1) of the International Tax Agreements Act 1953 (Cth), which allowed additional state taxes to be applied to foreign persons, was “valid and effective to retrospectively remove an inconsistency that had previously existed” in respect of the Land Tax Act 2010 (Qld) and the Land Tax Act 2005 (Vic).
While the decision appears to fly in the face of the significant focus on international investment in the trade strategies of both Queensland and Victoria, it should be noted that other opportunities for relief from foreign surcharges remain in state-based legislation. However, these relief opportunities are discretionary in nature and therefore require careful consideration to ensure that appropriate structures, which adhere to relief guidelines, are met prior to investment. Please reach out if you require assistance with structuring your investments to reduce the risk of foreign tax surcharges being imposed and/or applying for the available surcharge exemptions.
If you would like further information or have any queries regarding other matters, please do not hesitate to contact:
