If you are buying or selling property around Rosanna, Banyule, Carlton or anywhere across Melbourne’s north this year, there is an important change to the way land tax is handled at settlement — and the 2026 thresholds have just shifted again. With the State Revenue Office issuing this year’s land tax assessments and the end of the financial year upon us, it is a timely moment to understand who actually pays the land tax bill when a property changes hands.
Here is what has changed, why it matters, and how it affects your next sale or purchase.
The big change: vendors can no longer pass land tax to buyers
For decades, it was standard practice in Victoria for a vendor to recover part of their land tax from the purchaser at settlement. If a property settled mid-year, the buyer would typically reimburse the seller a pro-rata share of the land tax for the remainder of the calendar year, shown as a line on the statement of adjustments.
That practice has now been removed for most sales. Under the Sale of Land Act 1962 (Vic), a vendor can no longer pass their land tax liability on to a purchaser where the sale price falls below a set threshold. Any clause in a contract of sale that tries to do so is void and of no effect — and it is an offence for a vendor to include one, with penalties running into five figures.
The 2026 threshold: $10.7 million
The prohibition applies to contracts of sale with a price below the threshold amount, which is indexed each year to the Consumer Price Index and rounded to the nearest $100,000. For contracts entered into from 1 January 2026, that threshold is $10,700,000 (including GST).
In practical terms, that captures virtually every residential and small commercial sale in Melbourne’s northern suburbs. Only genuinely high-value transactions sit above the line, where adjustment can still be negotiated between the parties.
What this means if you are selling
If you own an investment property or any land that attracts land tax, you now wear the full calendar-year land tax bill regardless of when settlement occurs. A vendor who lists in February and settles in May still carries the entire year’s land tax, even though they only owned the property for a few months of it.
The takeaway is to factor land tax into your pricing and your expected net proceeds from the outset, rather than assuming you can recover a portion at settlement. Getting your figures right before you sign is far easier than discovering the shortfall on settlement day.
What this means if you are buying
For purchasers, this is good news. You should no longer see a land tax adjustment line working against you on the statement of adjustments for a sub-threshold purchase. If a contract you are reviewing tries to slip one in, it should not be there.
That said, due diligence still matters. A property clearance certificate confirms what land tax is owed on the property and ensures any outstanding amount is paid out of the sale proceeds before settlement is finalised — so the liability does not follow the land to you. This is exactly the kind of detail a conveyancer checks on your behalf.
A key point for owner-occupiers
If you are selling the home you live in, there is usually no land tax to adjust in the first place. A principal place of residence is generally exempt from land tax in Victoria, so for most family-home sales this change has little practical effect. It is primarily investors, developers and owners of second properties who feel it most.
Vacant Residential Land Tax: a wider net in 2026
Alongside the adjustment change, Vacant Residential Land Tax (VRLT) has expanded. Since 1 January 2025 it applies across the whole of Victoria rather than just inner Melbourne, and from 1 January 2026 it can also reach certain residential land in metropolitan Melbourne that has sat undeveloped for several years. Where it applies, the tax escalates the longer a property stays vacant.
If you hold a property that has been empty or undeveloped, it is worth confirming your VRLT position and any notification obligations, as penalties apply for getting it wrong.
New for 2026: duty on adjustments above the threshold
There is also a fresh development for higher-value and commercial transactions. From early 2026, the State Revenue Office has taken the position that where land tax or windfall gains tax is adjusted in a vendor’s favour on an above-threshold contract, that amount can form part of the consideration for the sale — and attract land transfer (stamp) duty. If you are involved in a larger or commercial deal, this is one to plan for carefully and take advice on before signing.
How Oakhill Lawyers can help
Property transactions are a significant milestone, and the rules around tax at settlement are easy to get wrong. At Oakhill Lawyers, we review your contract, run the necessary searches and certificates, and make sure every adjustment is correct — so your settlement is smooth and there are no surprises.
Whether you are buying, selling or simply planning ahead, we are here to give you clarity and peace of mind. Schedule a consultation for a no-obligation discussion.
