In May of this year, the Victorian government delivered their budget, including changes to their stamp duty and land tax regimes primarily focused on 'high value' transactions, being transactions of all land (residential, commercial, or otherwise) with a dutiable value over $2 million. These new measures took effect on 1 July 2021.
The Victorian government is also proposing a 'windfall gains tax' applicable on the increase in land value derived by landowners due to Council rezoning land.
Here, lawyer Luke Hefferan examines the effect of these changes on homeowners, home buyers, and developers together with the industry response.
The Victorian stamp duty regime now includes:
The Victorian land tax regime has been amended to provide:
Given the Victorian government has not proposed a Bill to outline the framework for this regime, the proposal is still at a very 'high level'. At this stage, it is proposed landowners who receive an uplift in property value due to Council planning decisions to rezone the land will be taxed at a rate of 50 percent for uplifts of $500,000 or more with the tax phasing in from uplifts of $100,000 or more.
Again, there is little framework around the specifics of this proposed regime. However, we will follow the developments in this area as we suspect there will be consultation required with the industry about—
The industry response to these changes has been primarily negative.
The Victorian division of the Property Council of Australia (PCA) claims the changes will ultimately place an unfair burden on home buyers and homeowners resulting in an increase in property rental rates throughout Victoria. The PCA also claims anyone who has invested in Victorian property, especially as part of a retirement plan, will now need to reconsider those investments, given the additional tax burden associated with their properties.
The Real Estate Institute of Victoria (REIV) mirrors the PCA sentiments, also claiming the amendments may result in self-funded retirees, for which property investments is their only income, leaving the property investment space. The REIV claims this will impact the economy and the availability of jobs in the Victorian property sector which is already struggling due to the pandemic.
The Tax Institute, a leading forum for the tax community of Australia with a membership of over 11,000 tax professionals, has criticised the amendments as being out of step with recent changes in other jurisdictions, moving away from the general ambition of harmonisation of stamp duty and land tax regimes between all jurisdictions.
The Tax Institute also noted the new concessions and exemptions from stamp duty could essentially be cancelled out by the subsequent rises in land tax liability. It also noted the 'high value' $2 million threshold does not reflect the Victorian property market, with 15 Melbourne suburbs having a residential median price above this threshold and a vast majority of commercial/industrial transactions selling for a contract price well above this threshold amount.
Our Real Estate lawyers can help with any questions you may have about the impacts of these increases to stamp duty and land tax, as well as your eligibility for any available concessions or exemptions.