2025-26 Budget Update: Key changes to Australian state taxes - Victoria, South Australia, and Tasmania

Following the delivery of the Northern Territory budget earlier this month (see our article here), Victoria delivered its FY2025-26 budget on 20 May 2025, which included the introduction of the State Taxation Acts Amendment Bill 2025 (Bill) on 27 May 2025.

The Bill contains amendments to the Build to Rent (BTR) concession which will be of significance to property developers, including changes to required rental terms, and stricter requirements for eligibility of dwellings for the concession.

The Bill also includes several initiatives relating to the Commercial and Industrial Property Tax (CIPT) regime, requirements to notify the Commissioner in respect of land owned through trusts, a new rate of penalty tax for taxpayer recklessness, the extension of the off-the-plan stamp duty concession, and payroll tax for regional employees.

Tasmania and South Australia each also delivered their FY2025-26 budgets, on 29 May 2025 and 5 June 2025 respectively. Neither budget includes significant changes to the state tax regime, including stamp duty.

Victoria

The key changes include:

Changes to required rental terms for dwellings in BTR developments

The Bill amends s 70F of the Land Tax Act 2005 (Vic) (LTA), which concerns the required rental terms for dwellings in a development that is eligible for the BTR concession. The amendments are intended to align with the policy objectives of the BTR regime, being to provide long-term secure alternatives to home ownership.

Under the current s 70F, a residential rental agreement of at least 3 years must be “available” to new renters, but they can elect to take a shorter lease (including shorter than 12 months). The amendments will require an owner of an eligible BTR development to genuinely offer rental agreements of not less than 3 years to new renters. The amendments also provide that rental agreements for terms of less than 12 months are no longer permitted, even if a prospective renter has requested a shorter lease.

The Bill also introduces new requirements into s 70F that must be met when a rental agreement for a term of less than 3 years is entered into, specifically:

• the parties must complete a declaration that a long-term rental option was genuinely offered but a shorter term was agreed to at the specific request of the renter; and
• the declaration must be provided to the Commissioner upon request.

Failure to provide the declaration will cause the dwelling to no longer satisfy the requirements of s 70F and lose eligibility for the BTR concession (though the Commissioner does have a discretion to ignore the non-compliance).

The amendments will only apply to new renters, with the owner of a dwelling in an eligible BTR development able to enter into an agreement of less than 12 months with an existing renter in the dwelling.

Stricter requirements for the BTR concession & discretion

The LTA presently provides that, to be eligible for the BTR concession, the dwellings in the development must be “rented or available for rent” during the land tax year. The Bill amends this requirement so that the dwellings in the development must be rented or “genuinely offered for rent” at all times. This is accompanied by the (unchanged) requirement at s 70B(1)(d) that the dwelling remain suitable for occupancy.

The change is intended to limit the circumstances where the concession can be accessed whilst the relevant dwellings remain vacant.

To mitigate the strictness of this requirement, a new s 70NA provides the Commissioner with a discretion to continue to allow the concession in circumstances where dwellings no longer satisfy the s 70B(1)(d)-(e) requirements. The criteria for exercising the discretion are:

• a concession applied to the land in the land tax year preceding the period in which the land no longer satisfies a requirement;
• the dwelling is temporarily unsuitable for occupancy; and
• the Commissioner considers that it is reasonable in the circumstances to disregard the dwelling not satisfying the requirement for that period (for example due to fire damage).

The Explanatory Memorandum to the Bill indicates that in the case of minor damage, or refurbishments or renovations that result in the dwelling not being offered for rent for an extended period, the Commissioner is unlikely to exercise the discretion to exempt the dwelling from the s 70B(1)(d)-(e) requirements.

Requirement to notify Commissioner of changes to land-owning trusts

Amendments to s 46K of the LTA are intended to clarify when the Commissioner must be notified of certain trust-related events. The amended s 46K requires notification to the Commissioner in the following circumstances:

• when a person becomes the owner of land as trustee of a trust;
• for a person who owns land as trustee of a trust, when the trust becomes a different category of trust; and
• when a person who owns land as trustee of a trust then becomes the owner of land in any capacity other than as trustee.

This notification requirement is likely to coincidentally highlight transactions in trusts which might give rise to stamp duty (e.g. vesting assets in a beneficiary or converting a trust from a discretionary trust to a unit trust).

Duty payable on transaction relating to subdivided CIPT land

“Tax reform scheme land” refers to property that has previously entered the CIPT regime under the Commercial and Industrial Property Tax Reform Act 2024 (Vic) (CIPT Act).

The Bill introduces to the Duties Act 2000 (Vic) (Duties Act) the new s 69AQC, which provides that if tax reform scheme land is a lot (child lot) in a registered plan of subdivision of tax reform scheme land (parent lot), the child lot is taken to inherit the entry interest and any further interest acquired in the parent lot, with the interests inherited by the child lot having the same quantum, characteristics and duty consequences as the interests acquired in the parent lot. For example, if 50% of the parent lot has entered the CIPT regime, and the parent lot is then subdivided, 50% of each of the child lots will be considered to have entered the CIPT regime (and a subsequent transfer of a child lot would be 50% exempt from duty).

The Bill also introduces an equivalent provision, s 89FAC, relating to relevant acquisitions in landholders whose holdings include subdivided tax reform scheme land.

The amendments were considered necessary as certain exemptions in the Duties Act involve consideration of the entry interest and any further interest acquired in tax reform scheme land.

CIPT regime: provisional determination that land has qualifying use

Per the CIPT Act, land may be eligible to enter the CIPT regime if it has a “qualifying use”. Currently, land cannot have a qualifying use if it is not allocated an Australian Valuation Property Classification Code (AVPCC) or has not been valued under the Valuation of Land Act 1960 (Vic).

The insertion of ss 4A and 4B into the CIPT Act authorise the Commissioner to provisionally determine that land has a qualifying use, in circumstances where there may be uncertainty as to the use of the land (such as whether the latest valuation did not allocate the land an AVPCC, or where 12 months have elapsed since the last valuation of non-rateable non-leviable land).

The effect of the amendment is that land that has been provisionally determined to have a qualifying use may enter the CIPT regime under a qualifying transaction. This is relevant to, for example, lots created on the registration of a plan of subdivision that have not yet been valued.

Introduction of new rate of penalty tax for taxpayer recklessness

The Bill amends the Taxation Administration Act 1997 (Vic) (TAA) to introduce a new rate of penalty tax for recklessness by a taxpayer or their agent as to the operation of a taxation law or their obligations under certain taxation laws.

New subsections (1B) and (1C) are to be inserted into s 30 of the TAA, which enable the Commissioner to increase the penalty tax to 50% of the unpaid tax if satisfied that a tax default or notification default was wholly or partly caused by the recklessness of the taxpayer or their representative as to the operation of a taxation law.

Off-the plan stamp duty concession extended

The stamp duty concession announced in October 2024 (originally for 12 months) is to been extended, via amendments to s 21AA of the Duties Act, to run through to October 2026. The concession is available to first-home buyers and owner occupiers who purchase an eligible apartment or townhouse off-the-plan before any construction work starts, and allows a 100% deduction of outstanding construction and refurbishment costs when determining the stamp duty owed.

• The Budget Paper provides the example of a $620,000 apartment on which a buyer could pay $28,000 less stamp duty (from $32,000 down to $4,000).
• $61 million is set aside under the budget to extend the concession.

Definition of “regional employee” for payroll tax purposes

The Bill proposes amendments to the Payroll Tax Act 2007 (Vic) (PTA) regarding the definition of “regional employee”, to clarify that an employee is a regional employee if wages paid or payable to the person are paid or payable for services performed “mainly” in regional Victoria (not taking into account services performed in other jurisdictions).

This change is to be made on the basis that currently, some Victorian businesses were performing services mainly in other jurisdictions; the intention of the amendments is that only time spent performing services in Victoria is to be taken into account.

Commencement Dates

The amendments contained in the Bill will come into operation on the following dates:

• 1 January 2026: amendments to the LTA in respect of BTR developments and land subject to a trust;
• 1 July 2025: amendments to the PTA; and
• day after the day on which the Act receives Royal Assent: remaining provisions of the Bill.

More to come

The budgets for the remaining States and Territories are expected over the coming weeks (subject to change):

• WA: 19 June 2025
• NSW, QLD, ACT: 24 June 2025