“I have never been one to increase a tax simply for the thrill of it”. These are the words of Tim Pallas.
Yet, I recently felt intrigued to spend some time analysing the new property taxes which have been introduced since the Andrew’s Labour government was elected in November 2014.
And here’s the alarming summary:
- 2015 – Foreign purchaser surcharge – additional stamp duty (currently, a whopping 8% additional duty. That’s in addition to the 5.5% – 6.5% rate!).
- 2016 – Absentee owner surcharge – land tax (currently, 2%)
- 2017 – Vacant residential tax – land tax (currently 1% of Capital Improved Value)
- 2019 – Economic entitlement – stamp duty
- 2021 – Stamp duty rate increase- stamp duty (increased to 6.5% for that part of the price over $2 million)
- From 1 July 2023 – proposed Windfall gains tax on rezonings.
- Oh, and let’s not forget the recently published SRO ruling which applied a much broader interpretation of ‘land development’ than ever contemplated by industry and now carries with it very worrying stamp duty consequences for many.
With property taxes already accounting for something like 40% of Victorian taxes, it’s difficult to see how much more taxing the sector can withstand.
The new windfall gains tax on rezoning which is expected to take effect from mid-July 2023 will deliver another hit to developers, purchasers and investors.
Development activity in the regions may simply become unfeasible. And even for the developers that can make it work, the tax will increase house prices for purchasers (many of whom have been forced to flock to the regions in the first place because they have been priced out of Melbourne metro and growth areas).
I am seeing it have (probably not even contemplated) impacts in the leasing space too. Ground lease deals are coming to a halt because a landlord can no longer permit rezoning to facilitate a tenant’s intended use given a landlord only collects rent & simply can’t afford to be slugged with the tax (even if it can be deferred until the earlier of the next dutiable event and 30 years).
This new tax will stifle property activity and hinder Victoria’s economic recovery which unsurprisingly is banking yet again on the property industry booming!