In Victoria, a segment of property developers—particularly those engaged in build-to-rent (BTR) schemes—are taking advantage of legal frameworks to sidestep certain state and local tax obligations. While not inherently unlawful, these strategies highlight gaps in legislation that municipalities and the State Revenue Office (SRO) are now scrutinizing.
Avoiding the Public Open Space Levy
Ordinarily, developers are required to contribute to local infrastructure by paying a public open space levy when subdividing land. These funds support community amenities like parks and recreational spaces. However, BTR developments often do not involve subdivision—they retain singular ownership across the entire site. Because the levy is triggered by subdivision under the Subdivision Act 1988, BTR projects can legally bypass this requirement entirely.
This omission significantly reduces costs for developers. For example, a traditional build-to-sell project with hundreds of apartments might owe millions in levies. In contrast, an equivalent BTR project avoids this financial burden, even though it places similar demand on public infrastructure.
City councils, including Melbourne and Yarra, are calling for reform, citing the inequity of imposing public space obligations on some developments while exempting others purely based on ownership structure.
Land Tax Concessions via BTR Status
BTR developments also benefit from significant land tax concessions under the Land Tax Act 2005. Section 70J provides a discounted land tax rate, while section 70K exempts eligible BTR developments from the absentee owner surcharge, even when owned by offshore entities.
To qualify, developments must meet criteria including minimum lease lengths (three years), unified ownership, and collective property management. These projects are also exempt from the Commercial and Industrial Property Tax (CIPT) under transitional rules tied to the land’s BTR classification.
This generous treatment was designed to encourage long-term rental housing, yet critics argue it allows developers to dodge fair tax contributions while offering premium rental products that do little to alleviate housing affordability.
Conclusion
By leveraging the legal structures of BTR developments, property developers in Victoria can currently sidestep both local council levies for public infrastructure and state land tax obligations. These practices, while lawful, expose regulatory blind spots that may undermine equitable development contributions. As councils and policy-makers push for reform, the longevity of these benefits remains uncertain.