New Penalty Tax for Recklessness

The Victorian Government has introduced a 50% penalty tax rate for taxpayer recklessness, following the passage of the State Taxation Acts Amendment Bill 2025 (Vic). The measure will significantly increase the potential penalties for non-compliance with state taxation laws.

What are the changes

The new law amends the Taxation Administration Act 1997 (Vic) and introduces a 50% penalty in cases where a tax shortfall is caused wholly or partially by recklessness – either by the taxpayer themselves or their agent. The 50% penalty will also apply to cases involved a reckless failure to notify under certain taxation laws.

Previously, Victoria applied:

• a 25% penalty for failing to take reasonable care; and

• a 75% penalty for intentional disregard for the law.

These penalties remain in please, but the new 50% tier for “recklessness” is a new category, positioned between negligence and deliberate non-compliance.

As with existing penalties, the law allows for substantial reductions where taxpayers voluntarily disclose errors. In some cases, penalties can be reduced to as little as 5% of the shortfall amount.

Additional Complexities

Victoria’s land tax, land transfer (stamp) duty and foreign purchaser rules are already significantly complex. Taxpayers who acquire property through trusts, or have foreign beneficiaries, often face additional obligations – many of which are not widely understood.

There are concerns that the default position taken by the State Revenue Office (SRO) may be to apply the penalty in cases where there is no clear line between an honest mistake and recklessness.

What this means for taxpayers

With the legislation now in force, individuals and entities in Victoria need to exercise a high level of caution to ensure that they understand and meet their tax obligations. Seeking early advice is key to ensuring that taxpayers are fully informed and not subject to unexpected tax exposure.

Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal

Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal

Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal