The Victorian budget has arrived and, as always, there’s plenty of news for property owners and investors as well as prospective buyers.
As the Victorian property market booms, there is some welcome news for first-home buyers with stamp duty concessions to remain in place for the foreseeable future.
The First Home Owner Grant remains in place for those building new homes in Victoria. Currently, those in metro areas are eligible to receive $10,000 and those in regional areas are eligible for a $20,000 boost.
Those grants will still be available from July 1, but the regional grant has been halved and will now only be $10,000.
However, there are also tax rises.
As always, State Government policy has the largest impact on Victorian property.
And this year, there’s plenty to talk about.
So let’s tackle the headlines.
Land Tax On The Rise
The State of Victoria’s budget for 2021-22 includes measures to raise land tax rates and the premium duty rate on land transfer duty (stamp duty) for high-value properties.
According to the budget papers, the land tax rate for taxpayers with larger property holdings will increase by 0.25 percentage point for taxable landholdings exceeding $1.8 million and by 0.3 percentage point for taxable landholdings exceeding $3.0 million beginning January 1, 2022.
Furthermore, beginning January 1, 2022, the vacant residential land tax exemption for new developments will be extended to apply for up to two years, which the government claims will help the construction industry by providing an exemption for at least two tax years after the completion of a newly constructed dwelling before the vacant residential land tax applies.
This change will be applied to both the general and trust surcharge rates.
Stamp Duty On The Rise
Meanwhile, beginning on July 1, 2021, a new land transfer duty threshold for high-value property transactions will be implemented.
The current land duty transfer duty rate for a property of more than $960,000 is 5.5% of the dutiable value. According to the budget papers, the land transfer duty payable for property transactions with a dutiable value greater than $2 million will from 1 July 2021 be $110,000 plus 6.5% of the dutiable value in excess of $2 million.
Stamp Duty Concessions For First Home Buyers
The Victorian government will provide much-needed tax breaks to first-time home buyers looking to enter the property market.
Many new home buyers will pay less stamp duty, with off-the-plan buyers able to save money thanks to a stamp duty concession that will temporarily increase from $550,000 to $1 million. The higher threshold will apply to contracts entered into between July 1, 2021, and June 30, 2023.
For contracts entered into between July 1, 2021, and June 30, 2022, a new 50% concession will apply for new residential property worth up to $1 million that has been unsold for less than 12 months.
Victorians purchasing new residential property worth up to $1 million in the Melbourne local government area will receive a stamp duty reduction of up to 100% if the property has been unsold for more than 12 months.
Off-The-Plan Boost For Buyers and Construction
Furthermore, the budget includes a provision to temporarily raise the eligibility threshold for off-the-plan concessions for contracts entered into between July 1, 2021 and June 30, 2023.
The off-the-plan concession for land transfer duty will be raised to $1 million. According to the budget papers, the property must be the primary residence of at least one of the purchasers.
According to the Budget Papers, “this increase will mean that in order to be eligible for the off-the-plan duty concession, the dutiable value of the property (the contract price minus the construction costs incurred on or after the contract date) can be up to $1 million.”
Windfall Gains Tax
A new windfall gains tax will be also introduced for properties whose value is boosted by a Council re-zoning. The tax will only apply to properties where the value is boosted by more than $100,000, with a 50 per cent tax on windfalls above $500,000.
If you have any questions about the budget and how they relate to any planned property purchases, get in touch with Tick Box Conveyancing today!