In last year's May state budget, the Victorian government announced a 10-year COVID debt levy in a bid to pay down the state's debt.
About 860,000 Victorians will be affected with 380,000 slugged an extra $878 on average, the Parliamentary Budget Office revealed on Thursday.
This will inject an additional $5.65 billion into the state's coffers between 2023/24 and 2026/27, almost $1 billion more than the $4.7 billion estimated in the budget.
The tax increase which came into effect on January 1, lowers the threshold for people who own land from $300,000 to $50,000.
Property investors will pay a fixed $500 fee each year for landholdings worth between $50,000 to $100,000, $975 if above $100,000 and an extra 0.1 per cent for every dollar above $300,000.
Health Minister Mary-Anne Thomas defended the higher take saying the government had been explicit about the land tax.
"What we have done is made a commitment to the people of Victoria that we will pay down the COVID debt," she told reporters on Thursday."The land tax, of course, is being applied - it's important to note - only to second homes or indeed multiple properties - not to the family home."
But Victorian Opposition Leader John Pesutto said vulnerable Victorians on modest incomes would pay the price under the increase.
"This tax grab by Jacinta Allen's Labor government is a desperate attempt to plug massive budget holes that have been caused by years of cost blowouts, waste, mismanagement, and even corruption," he said on Thursday.
The first part of the COVID levy, which came into effect on July 1 last year, slugged Victorian businesses with a national payroll above $10 million an extra 0.5 per cent in payroll tax.
Those with a national payroll above $100 million are paying an extra one per cent.
Despite the levy rolling out, a budget update in December revealed Victoria's net debt was forecast to climb to $177.8 billion by June 2027, $6.4 billion higher than estimated in May.
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