Is Land Tax Still Adjustable at Settlement in Victoria? Not Anymore—Here’s Why

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What Has Changed with Land Tax in Victoria?

For decades, it was standard practice to adjust land tax between vendor and purchaser at settlement. That is no longer the case.

As of recent legal reforms in Victoria, land tax must no longer be adjusted in most residential property transactions. This change applies to:

  • Residential homes

  • Residential investment properties

  • Residential development lots

Unless a specific exemption applies, attempting to adjust land tax at settlement may now breach the law—and trigger legal and regulatory consequences.

What Is Land Tax?

Land tax is a state government tax imposed on property owners as at 31 December each year, under the Land Tax Act 2005 (Vic).

It is payable on:

  • Investment properties

  • Vacant land

  • Land held in trusts, companies, or SMSFs

It is not payable on a person’s principal place of residence, land used for primary production, or otherwise exempt land.

Importantly, it is the vendor’s responsibility as the registered owner at the assessment date.

Why Has Land Tax Adjustment Been Prohibited?

This change was introduced to:

  • Prevent unsuspecting purchasers from subsidising vendor tax liabilities

  • Increase transparency and consumer fairness

  • Reduce misleading practices in residential contracts

Under the new rules, land tax must be disclosed, but not shared—meaning:

❌ Purchasers must no longer reimburse vendors for land tax
✅ Vendors remain solely responsible for the full land tax amount

This reflects the government's broader move toward consumer protections in property transactions.

Can Land Tax Ever Still Be Adjusted?

Yes—but only in specific, legally defined situations, such as:

  • Commercial or industrial property sales

  • Development land with planning permits or zoning classifications for non-residential use

  • Vacant land being purchased for non-residential development

Even in these limited cases, land tax adjustment must:

  • Be disclosed clearly in the Section 32

  • Be spelled out in a special condition

  • Comply with all disclosure obligations

If there is any uncertainty, legal advice should be obtained before including any adjustment clause.

Implications for Buyers and Sellers

🔹 For Purchasers:

  • You are not legally required to contribute to land tax on residential purchases

  • If a contract includes an adjustment clause, it may be unenforceable or illegal

  • You should review all documents carefully, especially the Section 32 and special conditions

🔹 For Vendors:

  • You must not seek a land tax adjustment unless your property is exempt from the ban

  • Your Section 32 must still disclose the amount of land tax assessed (if applicable)

  • If you include a land tax adjustment in breach of the rules, you risk contract challenge, penalties, or compensation claims

David Dawn’s Professional View

“The law has caught up with common sense. Land tax is a vendor’s cost—full stop. Purchasers should not be expected to fund a government tax that has nothing to do with them.”

At Victorian Property Settlements, we:

  • Review contracts for prohibited adjustment clauses

  • Advise purchasers if a land tax clause should be struck out

  • Help vendors disclose land tax properly without breaching the law

  • Ensure that compliance is clear, documented, and safe for all parties

Final Thoughts

Land tax is no longer a grey area in Victorian property law. Residential purchasers are not liable to contribute to land tax at settlement, and vendors must not attempt to shift the cost.

Contracts should reflect this legal reality—and conveyancers must be vigilant in enforcing it.

Need Professional Help Navigating Land Tax?

Victorian Property Settlements – Trusted for over 25 years by buyers and sellers who want it done right.
📍 Frankston | 📞 03 9783 0111 | ✉️ david@quick32.com
🌐 www.victorianpropertysettlements.com.au