A recent crackdown on tax evasion has unveiled nearly $900 million in avoided taxes and improperly claimed exemptions, highlighting the escalating financial burden on property owners facing rising land tax bills. The State Revenue Office (SRO) has intensified its investigations, leveraging artificial intelligence to identify $155 million more in alleged tax avoidance last year compared to the previous year.
Newly released data shows that the SRO identified $889 million in total liabilities for the 2024-25 period across 13,412 completed cases. These cases involved avoided taxes, levies, and falsely claimed grants or concessions, which the revenue body is actively pursuing. However, the data also reveals significant financial hardship among taxpayers struggling with new and expanded levies. Outstanding land tax debts have reached $643.5 million, an increase of nearly $70 million, with almost a third of these bills remaining unpaid for over a year.
Increasing Aggression in Debt Collection
Melbourne state tax lawyer Thomas Abraham from Macpherson Kelley observes that the SRO is adopting a more aggressive stance in its investigations and pursuit of unpaid bills. “It used to be that they would wait a minimum of six months, sometimes even a year, before pursuing unpaid debts,” he noted. “Now, it’s down to six weeks.”
Abraham further noted that inflated land tax valuations have become more common, particularly since the state government’s valuer-general assumed responsibility for all valuations in 2023. The expansion of Victoria’s land tax regime, initiated in 2024 to address the state’s ballooning debt projected to reach $194 billion by 2029, has significantly increased the financial burden on owners of multiple properties.
Impact of Expanded Tax Regime
The revised tax policy reduced the general tax-free threshold from $300,000 to $50,000, introduced new fixed surcharges, and raised existing rates on investment properties and holiday homes. While primary residences are generally exempt from land tax, then-treasurer Tim Pallas justified the increases by asserting that it was fair for Victorians with multiple properties to shoulder a larger share of the tax burden. Current Treasurer Jaclyn Symes has echoed this sentiment, emphasizing that the state’s tax settings consider those with a greater capacity to pay.
At the time, leading economist Saul Eslake criticized the government’s rationale, arguing that the new taxes were primarily intended to fund pre-election spending rather than address COVID-19 debt. Additionally, the government permanently expanded the Vacant Residential Land Tax to apply to properties across Victoria, effective January 1, 2025.
Challenges and Responses
Abraham highlighted that the new tax settings are significantly impacting property owners, leading many clients to sell investment properties and relocate out of the state. He noted that the SRO’s methods of obtaining information are often opaque, relying heavily on data-matching among government bodies and even using information from incoming passenger cards and the Australian Border Force.
“It’s often difficult to tell what actually happened—most taxpayers don’t have the energy to fight it. You don’t want to spend more on legal fees than you have to pay the SRO. A lot of times clients go, ‘look, we’ll just pay it’,” he said.
A significant focus of last year’s investigations was on taxes applied when a company or trust owning Victorian land worth $1 million or more changes ownership in a business deal. The SRO aggressively pursued this area in 2024-25, assessing $421.61 million in compliance revenue from landholder acquisition matters alone.
Political and Public Reactions
Opposition finance spokeswoman Bridget Vallence accused the Allan government of using AI tools to pursue Victorians who are already among the highest taxed in the country. She pointed out that more than 80 percent of tax assessment objections were related to land tax bills.
“The Allan Labor government is addicted to taxes, and like any addict is always looking for its next hit,” she said.
Vallence emphasized that given a quarter of land tax objections were upheld in full or in part, proving the government had wrongly taxed these Victorians, it needed to “come clean” about what AI data tools it was using and ensure more mistakes wouldn’t be made.
Previously, The Age reported that Victorian taxpayers had reclaimed tens of millions of dollars in erroneous land tax bills following a surge in objections after the state government’s controversial levy expansion.
The SRO’s tax investigations were bolstered last year by a significant increase in staff, with a $26.4 million rise in employee benefits partly due to an increase in “full-time equivalent numbers associated with compliance programs”. The SRO stated that several strategies and initiatives had been implemented to reduce aged debt, which would continue into 2025-26.
In a bid to enhance debt recovery efforts, the office recently signed an $8 million contract with private debt collector National Credit Management Limited over four years. A spokesperson for the treasurer noted that the SRO actively engages with taxpayers through various methods, such as emails, letters, and phone calls, to seek full payment or establish payment arrangements.
