Over the past 12 months there have been various policy changes affecting first home buyers, developers and foreign residents. This client alert draws on the key points and provides an overview of the changes.
Stamp duty changes
Off the plan stamp duty concessions are now only available to those purchasing a property off the plan which they will live in as their primary place of residence (as opposed to investors) where the dutiable value is up to $550,000. A full concession applies to first home buyers of new homes (for contracts entered into on or after 1 July 2017) valued up to $600,000 with a concessional rate applying to those extending to $750,000. The positive news is for those who purchased a new home (or an established home) for less than $600,000 before 1 July 2017, as they may still be eligible for a 50% duty concession, provided that settlement was after 1 September 2014.
Foreign resident capital gains withholding clearance certificate
The concept is that where a foreign resident disposes of Australian property, the purchaser is required to withhold an amount from the purchase price on account of capital gains tax and remit this to the Australian Taxation Office. By obtaining a foreign resident capital gains withholding clearance certificate, the vendor is confirming that they are not a foreign resident, and therefore there is no requirement for the purchaser to withhold funds. The threshold for obtaining a certificate is now applicable to properties valued at or above $750,000 for contracts entered into on or after 1 July 2017 (as opposed to the previous threshold of $2 million). The rate the purchaser must remit to the ATO has been increased from 10% to 12.5%.
It is important to keep in mind that even if the vendor is an Australian citizen or resident, they are treated as a foreign resident by the ATO unless the withholding certificate is obtained.
Vacant residential land tax
From 1 January 2018, a new tax was introduced in Victoria designed to provide an incentive to reduce the high number of houses and apartments being left vacant in the inner and middle suburbs of Melbourne. Essentially, vendors who have a residential property that is left unoccupied for more than 6 months of the year may be at risk of having this tax imposed. This self-reporting tax is imposed at a rate of 1% of the property’s capital improved value and is payable in the same way land tax is payable ie on a calendar year basis. The Victorian State Revenue Office may use key indicators to audit compliance including perusing utility bills to ensure vendors are complying with the new rules.
Key next steps
Regardless of whether you are a first home buyer, seasoned investor or developer, it is imperative that you are aware of your obligations and your available concessions under the new rules.