Understanding the new land tax in Victoria

The recent Victoria land tax changes have left many property owners uncertain about what’s next. From higher rates to lower thresholds, the new rules are creating challenges for investors, small business owners, and families alike who often rely on a small business accountant to stay compliant

Some are choosing to “wear the cost” and hold on to their investment or business property, while others are selling off their second or third holdings to avoid rising state taxes. But before you make any big financial decisions, it’s essential to speak to your accountant first for tailored advice.

Need clarity on your property tax obligations? Call (03) 9589 5488 or enquire now with Bruce Edmunds & Associates, your trusted accountants in Melbourne.

What is land tax, and who needs to pay it?

Land tax in Victoria is an annual charge applied to the total taxable value of all the land you own, excluding your primary residence. It’s calculated based on the site value (unimproved value) as of 31 December each year.

The Victorian Government applies different land tax rates depending on the value and type of land held, such as:

• Residential investment properties
• Vacant land or vacant residential land tax (VRLT)
• Commercial and industrial land
• Land held in trusts or through companies

These changes have affected a wide range of property owners. For example, a manufacturing business in Victoria with around $100 million turnover recently saw its annual land tax rise from about $3,000 to over $50,000 under the new rules.

Even for strong, established businesses, increases like these can quickly impact cash flow and planning, making early advice from your accountant essential.

You can check your current assessment and rates on the State Revenue Office (SRO) Victoria website.

What’s changed and why many are still feeling the pressure

Since January 2024, the Victorian Government’s land tax reforms — introduced under the COVID Debt Repayment Plan– have continued to impact property owners throughout 2025. While originally designed to help repay state debt, these measures remain active and continue to shape the way Victorians manage their property and investment portfolios.

Key measures include:

• The tax-free threshold for non-owner-occupied land was reduced from $300,000 to $50,000.
• A fixed surcharge of $975 is applied to most assessments.
• An additional 0.1% increase in the land tax rate for land valued above $3 million.
• The absentee owner surcharge doubled from 2% to 4%.

These adjustments mean many property owners — including small business operators, investors, and retirees — are still adapting to higher holding costs and more frequent State Revenue Office (SRO) assessments. For those with primary production land or commercial and industrial land, the ongoing land tax changes can significantly affect cash flow and long-term planning.

How these changes affect small businesses and property investors

Small business owners often hold property within their business or as part of a self-managed super fund (SMSF). With land tax thresholds lowered, even modestly valued commercial or investment land may now attract tax.

For example:

• Industrial land and commercial premises are subject to higher surcharge rates.
• Investors may face additional tax on vacant land or underdeveloped property.
• The windfall gains tax and vacant residential land tax (VRLT) have also expanded across more regions, increasing compliance obligations.

If you operate a small business or own investment properties in Melbourne, it’s important to understand how these rules apply to you — and how to structure your assets efficiently.

Related reading: Does Every Small Business Need an Accountant?

Why you should speak to your accountant before acting

Selling or restructuring property might seem like the simplest solution, but it’s rarely the smartest without proper advice.

Your accountant can help you:

• Assess whether you’re genuinely liable for land tax or eligible for exemptions (for example, on primary production land).
• Review ownership structures to minimise exposure.
• Evaluate cash flow impacts and long-term tax outcomes.
• Ensure your decisions align with broader financial and succession goals.

A good accountant looks beyond the numbers — helping you avoid costly mistakes and stay compliant with state taxes and the ATO.

Also read: 5 Financial Tasks Small Business Owners Shouldn’t DIY

Managing your obligations and planning ahead

Land tax is just one part of your overall financial landscape. Your accountant can integrate this into your business tax returns, personal wealth strategy, or SMSF management.

Here’s how Bruce Edmunds & Associates helps clients across Melbourne:

• Strategic advice for property investors and business owners
• Support with State Revenue Office assessments and objections
• Proactive planning for annual tax changes and compliance deadlines
• Personalised advice to reduce the impact of property tax in Melbourne

Further insight: Why You Need a Small Business Accountant in Melbourne

Stay informed and in control

Tax rules are changing more often than ever — from vacant land levies to absentee owner surcharges. For small business owners, retirees, and investors, these changes can easily impact cash flow, investment returns, and retirement planning.

Before making any big decisions, remember: Good advice today avoids big problems tomorrow.

Work with an accountant who takes the time to explain, guide, and plan — so you can stay confident in your financial future.

Need tailored advice? Speak to Bruce Edmunds & Associates — trusted small business accountants in Melbourne, helping clients navigate change with clarity and confidence.

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