The State Government has pathed their roadmap to economic advancement following the impact of the Covid-19 pandemic. The property industry has been identified as holding great capacity to generate the necessary funds required to aid Victoria’s recovery and progression.

In somewhat of a reprieve for Victorians who are struggling to purchase a home in the current market, it will be seemingly the most financially secure developers and landlords in the industry who are impacted.

The key points to note include a stamp duty increase for property purchases that exceed $2 million (otherwise known as the ‘dutiable value’).  Stamp duty for such transactions will be $110,000.00 for the first $2 million (which is based on the current rate of 5.5% ). 6.5% (compared to the current rate of 5.5%) of any dutiable value beyond $2 million will then be added to the total stamp duty payable. This represents an increase of $1,000 per $100,000 above $2 million. This “premium” duty rate is estimated to raise $761 million over 4 years commencing on 1 July 2021.

There will also be a 0.25% increase in taxable land values exceeding $1.8 million and over. And also a 0.30% increase for taxable land values exceeding $3 million. Land tax is a tiered tax, meaning depending on the value of your land, the rate of tax at each range will differ. Accordingly the 0.25% and 0.30% increases only relate to any value of land exceeding $1.8 million and $3 million respectively. Land tax is only ever applicable to investment properties and never someone’s primary residence. Land registered as being owned by a company will always be treated as taxable land.  This increase is expected to raise $1.5 billion over 4 years commencing on 1 January 2022 and covers the majority of the government’s budget goal.

Developers will also need to be mindful of the changes relating to land rezoning taxes (known as ‘windfall tax’). An example of this is former farming land being reassessed as potential residential land for a new estate. The new windfall will be phased in from rezoning gains worth $100,000.00 and above. The taxable percentage is determined by the rezoning gain amount with 50% being the maximum for gains of $500,000.00 and above. The government has stressed that these guidelines protect the majority of land owners. The windfall tax is expected to raise $124 million over 4 years commencing on 1 July 2022.

Despite the introduction of new taxes and increases in stamp duty and land tax, some concessions were announced. Brand new residential properties from the City of Melbourne local government area with a dutiable value of $1 million or less attracts either a 50% of concession for any new residential properties or a full exemption for new properties that have remained unsold for 12 months or more since completion of construction. Furthermore, there an off-the-plan concession thresshold has been temporarily increased from $550,000 to $1 million meaning more people will be eligible for the concession.

The State government has reiterated that this is the most fair and practical method to assist in funding the advancements that Victorians need. The expansion of public transport projects, school developments, and other forms of important infrastructure will be prioritised.

For an exhaustive list of changes visit the State Revenue Office.

Source: State Revenue Office website here

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