- Introduction of the Vacant Residential Property Tax
- Removal of off-the-plan stamp duty concessions for investors
The Victorian Government has announced that it intends to introduce a suite of initiatives to increase housing affordability and re-balance the market between investors and home buyers. In addition to abolishing stamp duty for first home buyer purchases under $600,000 and doubling the first home owner grant in regional areas, the Government is also introducing a Vacant Residential Property Tax (VRPT) and removing off-the-plan stamp duty concessions for investors.
The introduction of the VRPT and the removal of the off-the-plan concession are the new measures most likely to directly impact property investors and developers.
Introduction of the Vacant Residential Property Tax
In an attempt to reduce the number of vacant houses and apartments in the inner and middle areas of Melbourne, the Victorian Government intends to introduce a new tax that will apply to dwellings that are vacant for more than a total of 6 months in a calendar year. The VRPT will be payable on a calendar-year basis, and will apply at a rate of 1% of the capital improved value of a property (i.e. the combined value of the land and buildings as determined by a council valuation process every second year).
Under the proposed new scheme, owners of vacant residential properties will be required to notify the State Revenue Office (SRO) if their property is subject to the VRPT. It is anticipated that the SRO will also undertake its own separate monitoring and compliance activities.
It is expected that certain property types will be exempt from the VRPT, such as deceased estates, holiday homes, homes owned by Victorians that are temporarily overseas and city units owned for work purposes.
It is proposed that the VRPT will apply from 1 January 2018 to vacant residential properties in the following local council areas in inner and middle Melbourne:
- Glen Eira
- Hobsons Bay
- Moonee Valley
- Port Phillip
Removal of off-the-plan stamp duty concessions for investors
Under current off-the-plan stamp duty concessions, generally purchasers only pay stamp duty on the value of land (and improvements, if any) as at the date of the purchase contract.
For contracts entered into on or after 1 July 2017, the off-the-plan concession will only be available to those purchasers who will occupy the property as their principal place of residence, or those who qualify for the existing first home buyer stamp duty concession. Accordingly, it is proposed that the concession will no longer be available for purchases of commercial or residential investment properties.