Diritto immobiliareAmendments to the Sale of Land Act – Prohibition on recovery of land tax from 1 January 2024

In the closing months of 2023, the Victorian Government pushed through amendments to the Sale of Land Act 1962 (the Act), inserting inter alia section 10G into the Act which applies to all contracts of sale with a purchase price of less than $10m.

Section 10G(1) of the Act prohibits a vendor (and negates any clause in a contract of sale) from requiring the purchaser to pay an amount for, or contribute towards any land tax liability that a vendor may be liable for under the Land Tax Act 2005.

Accordingly, purchasers and vendors should be aware that land tax is no longer able to be adjusted at settlement and a statement of adjustments should not include any amount for land tax for contracts entered on or after 1 January 2024. However, it is still important to ensure that a land tax clearance certificate is obtained as part of the adjustment process and that any outstanding liability for land tax is paid by the vendor at settlement as land tax is still a first charge on land pursuant to section 96 of the Land Tax Act 2005.

Additionally, section 10G(2) of the Act now also prohibits clauses in a contract of sale that require a purchaser to pay any amount for or toward any land tax liability of the vendor. This provision makes the inclusion of a clause prohibited by section 10G(2) of the Act an offense with a penalty of 60 penalty units for a natural person and 300 penalty units for a corporation.

The inclusion of section 10G of the Act is not retrospective and contracts containing a clause requiring land tax to be adjusted which were entered prior to 1 January 2024 are not affected by the new section 10G of the Act by virtue of section 58(1) of the Act.

The most recent version of the Law Institute of Victoria General Conditions for a contract of sale of land incorporate general condition 23.2(b) which provides that the land is to be ‘…treated as the only land of which the vendor is owner (as defined in the Land Tax Act 2005)’, this provision does not contravene section 10G(2) of the Act as it does not require an adjustment of land tax. Typically, clauses requiring a purchaser to adjust land tax or pay an amount for or toward a vendor’s land tax liability are contained in the special conditions of a contract of sale.

Accordingly, vendors should be careful to ensure that any contract of sale special conditions which they use for the sale of property from 2024 onward does not contain a term requiring land tax to be adjusted or for the purchaser to pay any amount for or toward a land tax liability of the vendor.

Articolo scritto da Brendan Hoogenbosch del nostro ufficio di Melbourne.