Constructing or Renovating Your Home in 2027? Incoming Victorian Land Tax Changes May Offer Greater Flexibility on Claiming a PPR Exemption

Homeowners constructing their new homes or planning a major renovation may soon have greater certainty when accessing Victoria’s principal place of residence (PPR) land tax exemption during the period of the construction or renovation.

The Building Legislation and Treasury Legislation (Tax Relief) Amendment Act 2026 (BLTLAA) introduces several amendments to the Land Tax Act 2005 that are designed to broaden access to the PPR construction and renovation exemption and to better align with the practical realities of residential building projects. The changes commence on 1 January 2027.

For many homeowners who are in planning to renovate their homes, the amendments recognise a common reality: renovation projects do not always proceed according to plan, and existing exemption requirements can be difficult to satisfy when there are delays in obtaining permits, commencing works or moving back into the property.

The Construction and Renovation PPR Exemption

Victoria’s land tax legislation currently provides a temporary land tax exemption for land on which a person is building or renovating their future home, even though they are not yet living there. This exemption is aimed to allow a homeowner to keep the PPR exemption while constructing or renovating a home that they genuinely intend to move into.

Without this exemption, a property undergoing construction or renovation could become subject to land tax if the homeowner is not continuously using and occupying the land during the construction or renovation period, even though the owner’s intention is to occupy the property as their home once works are completed.

The PPR construction and renovation exemption is therefore particularly important for homeowners who:

• demolish and rebuild their home;
• undertake substantial renovations requiring them to move out temporarily;
• purchase land and construct a residence intended to be their home; or
• experience extended construction timeframes due to labour shortages, permit delays or other factors.

Major Changes to the Exemption under BLTLAA

Following are some of the major changes coming into effect from 1 January 2027 under the BLTLAA.

Revised Occupation Requirement

One of the more significant amendments relates to the concept of the “qualifying occupation date”, which is the date on which a qualifying person (i.e the homeowner) must begin to use and occupy land as a principal place of residence post construction or renovation to comply with the residence requirement of the construction and renovation PPR exemption.

The phrase “qualifying occupation date” is currently defined to mean the earlier of 6 months after the works finish date or 4 years after the works start date of the construction or renovation.

Under the amended provisions, the qualifying occupation date for a newly constructed or renovated residence will be simply the date that is six months after the works finish date.

This change removes the maximum period of 4 years after the works start date as the qualifying occupation date and recognises genuine PPR cases may involve construction or renovation beyond 4 years.

Many owners experience delays in returning to occupy a property after construction is complete. Practical completion, final trades, cleaning, landscaping and relocation arrangements can all affect move-in timing. A fixed period linked directly to the completion of works may provide a more straightforward framework for determining eligibility as opposed to having to work towards a current ceiling of 4 years from the works start date.

Expanded Works Start Date Definition

The legislation also changes the definition of the “works start date”, being the date on which the homeowner commences their renovation works.

From 1 January 2027, the homeowner who wishes to rely on the construction and renovation PPR exemption will be able to nominate a wider range of dates as the commencement of their construction or renovation project. These may include:

• the date a planning permit is issued;
• the date a building permit is issued; or
• the date the owner undertakes specified preliminary activities connected with the construction or renovation.

For homeowners, this change may provide greater flexibility in demonstrating that a genuine construction or renovation project has commenced.

In practice, construction projects often begin well before physical building work starts on site. Obtaining permits, engaging consultants and completing preparatory works can take many months. Allowing permit dates to be used as the nominated commencement date may assist homeowners whose projects experience unavoidable delays before construction begins.

Deferral of Land Tax on Short Term Projects

Currently, the Commissioner may defer the payment of land tax for 6 months if the land is or has been exempt under the construction or renovation PPR exemption and the works finish date for the construction or renovation was on or after 1 July in the preceding year and property was not occupied as the owner’s home as at 31 December in the preceding year.

Under the current deferral system, owners who start and finish construction or renovation works within the same year, but as at 31 December of that year, had not used and occupied the land as their principal place of residence are not entitled to the exemption in the only year that the land was unoccupied due to construction or renovation.

Under the changes, the deferral will also be available in the scenario where the works start date for the construction or renovation of a residence on the land had occurred in the preceding year and the works finish date had occurred on or after 1 July, also in the preceding year even if the land is or has not been exempt under the construction or renovation PPR exemption.

Impact on Joint Owners

The amendments also affect the operation of the existing joint ownership provisions.

The amendments expand the circumstances in which a co-owner’s entitlement to another principal place of residence (PPR) exemption may affect the availability of the joint ownership concession. The amended provisions now expressly take into account situations where a co-owner is already receiving the new construction or renovation PPR exemption under the construction and renovation PPR Exemption.

In practical terms, a person who:

• has another property exempt as their principal place of residence; or
• owns another property that is exempt under the construction or renovation PPR exemption; or
• is treated as a qualifying person for the construction or renovation PPR exemption on another property,

may not be able to access the favourable joint assessment treatment that would otherwise apply to jointly owned land.

Implications to the Homeowners Constructing or Renovating their homes

The amendments represent a welcome acknowledgement that modern residential construction projects are often complex and lengthy. By providing greater flexibility around commencement dates, updating occupation requirements and expanding administrative discretion, the reforms are likely to reduce the risk that genuine homeowners lose access to the PPR exemption simply because a renovation project takes longer than expected.

Although the changes do not remove all eligibility requirements, they should make the exemption more practical for homeowners undertaking significant renovations or rebuilding projects across Victoria.

How we can help

Our property law and tax law teams work closely with homeowners and property investors to navigate complex land tax issues in the most practical and cost effective ways.

Contact us

For further information please contact Corporate & Commercial Senior Associate, Peter Azam on 03 5273 5273 or email info@coulterlegal.com.au.