Danni Hunter, executive director of the Property Council of Victoria, says: “Putting these changes out just days after the federal budget had aimed to offer incentives across property — it means Victoria is losing an investment advantage. What’s more, it is going to cut across several schemes that Treasurer Frydenberg just unveiled, especially the widening of the downsizer scheme.”
With inflation running at barely 2 per cent the Victorian government has pre-announced state budget changes, which include an increase in stamp duty of 18 per cent and an increase in land tax of 13 per cent. There are also increases to rezoning profit taxes.
The new taxes cut in on properties worth more than $1.8m — a point which is expected to hit at least 70,000 properties, with that number rising in the months ahead. In relation to federal budget housing incentives, the new changes are most likely to hit “downsizers” moving to access the widened federal scheme which will allow anyone over 60 to add $300,000 to super from the sale of a family home regardless of contribution rules.
The move also puts Victoria in direct contrast to New South Wales, where the Berejiklian government has been examining a plan which would allow home buyers to avoid stamp duty entirely, if they opt to pay an annual property tax.
Investors in Victorian properties have already been trying to come to terms with new state rental legislation. Under the new rules, anyone owning a property has to provide a range of assets and services in a rental property — the menu runs well beyond basics and includes more than 100 specific terms.
Property owners have been criticising the rules, which included a contentious clause that a tenant’s track record has to be effectively wiped clean: applicants for new tenancies do not have to reveal any former record of disputes with property owners or of disputes over property bonds.
“Victoria should be reviewing the future of property taxes such as stamp duty, but we are going the other way,” says Hunter.
Leah Calnan, president of the Real Estate Institute of Victoria, calls the moves “an assault on property owners”. According to Calnan, “these sledgehammer taxes could cause a flight from property by self-funded retirees for which property investment is their only form of income.”
Jarrod McCabe of Wakelin Property Advisory says investors have only started to look at the market again, while rental yields are still below where they were 18 months ago: “It’s a poorly aimed measure,” he suggests.
Under the new tax plan the Victorian government will increase stamp duty and land taxes along with a new “windfall gain” tax on some land where rezoning has provided an uplift in property values — under this proposal, profits will be taxed at 50 per cent. The stamp duty and land tax hikes are expected on July 1 this year, with the windfall gain tax — the most ambitious of the changes — due for July 1, 2022.
At the 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.”
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A raft of unexpected taxes aimed at property owners unleashed by the Victorian government have been branded as an “assault” by industry groups still getting to grips with a new regulation regime for rental property.