Both the State revenue office (SRO) and City of Port Phillip (CoPP) are proposing draconian new taxes to encourage the development of vacant land. The big problem is that it is a bad time to build a house, it has not been a good time since the start of Covid. We now have severe building labour shortages, resulting in delays and diminished quality. Labour, material and finance costs have also increased dramatically.

On top of this, the SRO are implementing a vacant unimproved land tax which will start January 2026 at 1% of value and increase to 3% by 2028. This brutal tax is certainly going to make owners think about selling or developing in this difficult market. 

As if this is not enough, the Council now decides to triple the rates, rubbing salt into the wound. The SRO gave a two-year grace period, from legislation to implementation in January 2026. Not so for the CoPP, there is no mention of any grace period to allow time to get permits, to build, or to sell up. If it is approved on the 26/6/2024, it looks as if they will start charging penalties 5 days later. 

If I find the extra penalties too much ($6K rates + $52K land tax) and sell, the new owner will get a 5 years' grace period from the land tax penalty. Surely the council should give a similar grace period to allow the new owner time to develop the property in a timely manner without being penalised. 

There has also been no mention as to when the penalty rates will stop being levied. Is it when the town planning process is started, completed, building permit granted or building works commenced.

From talking to councillors, the targets of penalty rates are larger, unsightly, poorly maintained properties in prominent positions. Small, well maintained, properties like mine are just collateral damage. Surely there are other ways to target the offensive properties without victimising innocent landowners. If this is not possible with existing laws, perhaps new ones could be created at state or Council level.

In my case, I submitted plans to town planning two weeks ago and paid the fee for a pre-application meeting. I am complying with the councils wishes. Am I still to pay penalty rates if they are adopted? Surely not! According to some councillors, I should be penalised while complying with council wishes, up until the time the building is completed, even though I started the process before owning vacant land had become a crime.

As an alternative to rate penalties, I put forward a win-win proposal to use vacant lots for community purpose, such as a community garden. Councillor Martin said he could think of a hand full of suitable properties including mine and would put forward this proposal at the council meeting next week.

It will be interesting to see how things play out at the Council meeting. Hopefully reason and fairness will prevail. 

If you have similar concerns, you can call me on 0411 397 111.

Brian (owner of 200 Nott St. Port Melbourne)