Have you heard the news about the proposed hikes in Stamp Duty and Land Tax in Victoria?
This means that Victorians will be the most highly taxed community in Australia if the Andrews Government has its say.
The Andrews Government announced massive tax hikes including a $2.4 Billion Land Tax grab on homebuyers, homeowners, and property industry jobs to be featured in this week's Victorian State Budget.
And this comes on top of the recent significant changes to rental legislation in Victoria moving the balance of power to tenants rather than property investors / landlords
The changes announced today were:
- A 19 per cent increase in land tax on properties valued at between $1.8 million and $3 million, with the rate to increase from 1.3 to 1.55 per cent;
- A 13 per cent increase in land tax on properties valued at more than $3 million, with the rate to increase from 2.25 per cent to 2.55 per cent;
- An 18.2 per cent increase in stamp duty on a property's value above $2 million, with the value up to $2 million to be taxed at the current rate; and
- A new Windfall Gain Tax, which would apply from 1 July 2022, where 50 per cent of the value of uplift as a result of a rezoning (both local government and state government), as assessed by the Valuer General at the time of the rezoning, will be taken by the Government.
Every other state is aware the property industry is the lifeblood of the economy, and they are welcoming new investment because they know it is good for jobs and good for people.
In fact, the Berejiklian government is considering a change to NSW Stamp Duty which would essentially see buyers given the choice of paying stamp duty or opting for an annual land tax when acquiring a property.
By the way...Victorians already pay the highest land taxes in Australia, and yet the Andrews government is hiking them up even further
These changes are unlikely to cause current investors to leave Victoria, the capital gains tax would be too expensive, but it is likely to dissuade new investors buying in Victoria, meaning higher rents and better returns for those who stay in the market.
Victoria’s proposed Windfall Gain Tax will stifle development and cut new housing supply by adding up to $25,000 per housing lot in areas such as the regions where affordable land is most needed, industry estimates show.
And Victoria’s hard-slugging land taxes will dampen business investment and drive major corporate tenants from the state, according to David Harrison, who runs the country’s largest commercial property owners, Charter Hall.
The land tax rise, the cornerstone of a suite of increases to be announced in this week’s state budget, will raise an estimated $380 million extra each year.
The bulk of that will get passed on directly to business tenants, large and small, who pay it as part of their outgoings.
“This will flow through to the viability of tenants. Ultimately that is a deterrent for economic activity,” said Mr Harrison, who last month took over as president of the Property Council of Australia
“Yes, it may redirect business to elsewhere in Australia, but it may redirect business out of Australia, full stop. It’s not a zero-sum game. It could actually be a net loss to the Australian economy.
Victorian Executive Director of the Property Council, Danni Hunter said,
“This is a sucker punch to the industry that is building Victoria’s recovery. One in four Victorians work in property and the Victorian Government is raising taxes at a time when it should be creating jobs.”
“This is a tax hike on the home ownership dreams of Victorians. We are heading toward a housing affordability crisis and the Victorian Government has fast tracked our way there by slugging homebuyers and businesses in this short-sighted move.”
“The Government knows the price for these tax changes will be paid by every single Victorian."
Leah Calnan REIV president said:
Victorian homeowners, buyers and mum and dad investors will be hit with double digit percentage increases in land tax, stamp duty and a new tax on property investment and development.
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The REIV strongly believes that the tax hikes will make Victoria a less desirable place to invest, ultimately harming jobs and the economy.
The government continues to burden Victorians with increases to property taxes.
Property already accounts for more than 40 per cent of government revenue.
There is not much more capacity any one sector to absorb further tax burden.
If the Victorian Government is serious about jobs and housing it needs to invest in real estate, not attack it.
These sledgehammer taxes could cause a flight from property by self-funded retirees, for which property investment is their only form of income.
Commercial property management and residential property management have been decimated," she said.
There's high vacancy, there's lots of unpaid rent and this is just another effective tax that those property investors now have to manage.
We don't want to see Victoria become the state no one wants to invest in and with additional taxes for the property sector, that's where we're heading."
Housing Industry Association, executive director Fiona Nield suggests:
“These new taxes will dampen demand for housing at the wrong time for Victoria.
With HomeBuilder ending and immigration unlikely to return for sometime, making this type of decision now will put further pressure on an already declining demand in 2022 and 2023.”
Ms Hunter said that...
“Tax hikes will cheat Victorians out of the economic recovery we are just starting to enjoy. They will make it more expensive to buy a home, harder to rightsize your home and less attractive to deliver the new housing we so badly need if house prices are going to remain affordable in Victoria.”
These tax hikes will make Victorians the most highly taxed community in Australia.
Victoria’s land tax rates, and stamp duty rates will be higher than in any other jurisdiction.
“Victoria’s competitive advantage will be lost to other cities where governments are rolling out the red carpet to welcome new investment because they know it is good for jobs. Instead, Victoria is hiking up lazy, inefficient taxes when what we need is certainty and more investment in our great state,” said Ms Hunter.
A new tax on rezoning will deter development activity that enhances our urban fabric. Ms Hunter said this new tax was a blatant and exorbitant attempt by Government to profiteer from the investment of the property industry in developing and delivering city-shaping projects.
“This new tax is the ninth new tax on Victorian property introduced under the Andrews/Pallas administration. If their intent is to drive investment to other Australian cities who are rolling out the red carpet for investment and creating jobs, then this new tax will do it,”
Victoria has one of the country’s highest unemployment rates at 6.1 per cent.
The property industry employs 25 per cent of Victorians but relies on a solid pipeline of development, construction and new housing projects to maintain this level of employment.
We need to focus on creating more jobs and growing our economy, not penalising investment and increasing cost and risk.