In Melbourne, there are the exclusive neighbourhoods of Elsternwick, Hawthorn, South Yarra and Toorak, to name a few, where the median house price is above $2 million.
Where a property is acquired from 1 July 2021, those buyers will be paying the top rate of stamp duty. For a property worth $2.2 million, that is an increase of $2,000 in stamp duty to be paid under the new premium duty.
However, it is the commercial sector that will be hit the hardest with the new increase in property taxes, as they will be the ones that will have the capacity to make a contribution. This includes property developers, speculators and well-off landlords who will not only be hit with the increase in stamp duty, but they will also be affected by land tax and the windfall gain tax.
The windfall gain tax will apply where an ex-industrial land is rezoned or new residential estates are created and a gain of $100,000 is made. The higher the gain, the higher the tax.
We have summarised below the recent changes to Victorian Property Taxes that have been introduced as part of the 2021/2022 Victorian State Budget:
Increase to Land Tax
- 25% increase on landholdings worth $1.8 – 3 million.
- 3% increase for taxable land holdings above $3 million.
- Changes effective from 1 January 2022 for the 2022 land tax assessment year.
- Windfall Gains Tax of 50% uplifts in value greater than $500,000 on rezoned land; changes effective from 1 July 2022.
- GAIC affected land not impacted by Windfall Gains Tax.
Increase to Stamp Duty
- Property transactions with a dutiable value above $2 million will be subject to a new premium duty rate, where the duty payable will be $110,000 (based on 5.5% up to the value of $2 million) plus an additional 6.5% for the dutiable value that exceeds $2 million.
- Changes effective from 1 July 2021.
- Note, contracts entered into before 1 July 2021 that settle after 1 July 2021 are not affected by the new stamp duty rate.
But it’s not all bad news. Some initiatives below:
Off-the- plan duty concession threshold widened
- An increase in the off-the-plan dutiable value to $1 million for all home buyers, where contracts entered into between 1 July 2021 and 30 June 2023 (currently the dutiable value is either $750,000 for first home buyers or $550,000 for other home buyers, who are owner occupiers).
Stamp duty exemption – City of Melbourne
- 100% duty exemption (including any Foreign Purchaser Additional Duty) for purchases of new residential property that has been unsold for 12 months or more since completion, with a dutiable value of up to $1 million.
- Only applies to properties located within the City of Melbourne.
- Applies to contracts entered into between 21 May 2021 and 30 June 2022.
- 50% duty concession (excluding Foreign Purchaser Additional Duty) for purchases of new residential property has have been unsold for less than 12 months, with a dutiable value of up to $1 million.
- Applies to contracts entered into between 1 July 2021 and 30 June 2022.
Vacant residential land tax exemption for new developments
- Vacant residential land tax exemption available for land that is developed and becomes new residential land during the first year or the two years preceding a tax year.
- Effective 1 January 2022.
Please contact one of our real estate lawyers in our Property Team to discuss further.
Insight written by Tamara Maksimovic