Labor bows to Greens in deal to pass homes tax changes

A deal to expand taxes on empty homes and undeveloped land has been struck between the Victorian government and the Greens.

An upper house vote on changes to Victoria’s vacant residential land tax was put on ice earlier this month when the Greens and the coalition refused to back the legislation.

But the bill is set to return for debate after the government bowed to the Greens push to lift the yearly tax on homes left unused for more than three years from one per cent of the property’s total value to three per cent.

The government also agreed to trial an enforcement system across metropolitan Melbourne.

Victorian Greens leader Samantha Ratnam claimed the stronger vacancy tax could free up as many as 5000 extra homes as long-term rentals.

“These changes secured by the Greens will help drive down rents and mean more people can access a home,” she said on Tuesday.

Victorian Greens Leader Samantha Ratnam says the tax changes will help drive down rents. (Diego Fedele/AAP PHOTOS)

“If Labor wants to continue passing their housing statement through parliament, they’re going to need to work with us on the kinds of solutions that will fix this crisis.”

Victoria’s vacant residential land tax applies to homes unoccupied for more than six months a year across 16 inner and middle Melbourne councils.

Owners are charged one per cent of the property’s total value a year, meaning one worth $500,000 would be taxed $5000.

Under Labor’s proposed changes, the tax would be expanded statewide from 2025 along with existing exemptions for holiday homes and properties under renovation.

Owners of residential land in established parts of metropolitan Melbourne who leave it undeveloped for more than five years would also be liable to pay the tax from 2026.

About 900 Melbourne properties are subject to the vacant residential land tax at present, netting the state about $10 million a year.

When the reforms were unveiled in October, Treasurer Tim Pallas said treasury estimated expanding the tax statewide would pull in an extra $6 million in revenue a year for the state across another 600 to 700 properties.

The change to undeveloped land was projected to capture 3000 properties, adding another $31 million to the state’s coffers annually.

Mr Pallas insisted all other changes in the sweeping tax legislation were minor and would have no impact on state revenue.

But the Clean Energy Investment Group last week flagged renewable generators could be on the hook for higher annual fire services levy charges under a tweak to the Valuation of Land Act.

The Victorian government has been contacted for comment.