Property owners feel strain over surging land tax bills

The changes reduced the overall tax-free threshold from $300,000 to $50,000, introduced new flat surcharges and increased available rates for investment properties and vacation homes. Primary residences are generally not liable for land tax.

Then-treasurer Tim Pallas justified the increase by arguing that it was fair for Victorians who owned more than one property to have a larger share; That view has since been echoed by current Finance Minister Jaclyn Symes, who said the state’s tax regulations take into account those with a greater ability to pay.

At the time, leading economist Saul Eslake criticized the government’s justification of new taxes as a way to rein in inflated COVID-19 debt, instead arguing that the revenue was mainly aimed at funding pre-election spending.

Separately, the government has permanently extended the Vacant Residential Land Tax to apply to properties anywhere in Victoria, effective January 1, 2025.

Abraham said the new tax regulations have negatively impacted many people, leading to many clients deciding to sell investment properties and leave the state.

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He said the SRO’s methods of obtaining information were often opaque, but noted the agency relied heavily on matching data between government bodies, even using information from arrivals cards and the Australian Border Force to hunt down taxpayers.

“It’s often difficult to tell what’s actually happening; most taxpayers don’t have the energy to fight it. You don’t want to spend more on legal fees than you have to pay to the SRO. A lot of times clients will say ‘look, we’ll pay it,'” he said.

One of the main targets of last year’s investigations was on taxes imposed when a company or trust owning land worth $1 million or more in Victoria changes ownership in a business deal. The SRO has aggressively pursued this area in 2024-25, assessing $421.61 million in compliance revenue from landowner acquisition matters alone.

While the SRO says it uses artificial intelligence to detect fraud and assist with investigations, it remains secretive about the actual programs and algorithms used.

Opposition finance spokeswoman Bridget Vallence accused Allan’s government of using AI tools to go after Victorians who “already have the highest taxes in the country”. He noted that more than 80 percent of tax assessment objections were against land tax bills.

“The Allan Labor government is addicted to taxes and, like any addict, is always looking for the next hit,” he said.

Vallence said given a quarter of land tax appeals were fully or partially upheld, proving the government was wrongly taxing these Victorians, it needed to “clarify” what AI data tools it was using and ensure no further mistakes were made.

Age has previously revealed Victorian taxpayers are recovering tens of millions of dollars from botched land tax bills following a surge in objections following the state government’s controversial expansion of the tax.

The SRO’s tax investigations were helped by a significant increase in staff last year; There was a $26.4 million increase in employee benefits, due in part to an increase in “full-time equivalent numbers associated with compliance programs.”

The SRO said various strategies and initiatives have been put in place to reduce legacy debt, which will continue moving forward in 2025-26.

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The office last month signed a contract worth $8 million over four years with private debt collector National Credit Management Limited.

A spokesperson for the treasurer said the SRO is actively communicating with taxpayers through a variety of methods, including emails, letters and phone calls, to obtain payment in full or to set up a payment arrangement.

“This is standard practice in Australia and around the world,” he said.

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