Victorian state budget 2017: What does it mean for buyers, renters and investors

Property investors were the real estate losers of Victoria’s state budget, with some potentially having to reconsider the future of their investments following the introduction of a new tax and the closing of an existing loophole.

 Investors were the hardest hit in the Victorian state budget. Photo: Chris Hopkins

Investors were the hardest hit in the Victorian state budget. Photo: Chris Hopkins

As expected, a new Vacant Residential Property Tax for properties left unoccupied for six months or more, and the removal of a concession which allows partners to transfer investment properties to one another tax free, were among a suite of property-related announcements made on Tuesday.

Treasurer Tim Pallas released the budget with little surprises for the real estate sector, having announced most during the Andrews government’s affordability package earlier in the year.

It included the anticipated $851 million the government says it will provide to abolish stamp duty for first home buyers on properties up to $600,000 and cuts to those up to $750,000. At the same time, the state is removing off-the-plan stamp duty concessions for investors.

But Victoria’s buoyant property market clearly underpinned the budget, with $6.2 billion in stamp duty and $2.4 billion in land tax revenue in 2017-18 expected to bolster the state’s bottom line. More than $82.5 billion was transacted through property deals last year, according to the Domain Group, although a full data set is still being collected and is expected by chief economist Andrew Wilson to be significantly higher.

The new vacancy tax is expected to produce about $80 million in revenue for the government in the next four years and will come into effect on January 1, 2018, for properties left vacant this year.

Properties will be deemed vacant if they are left unoccupied for six months or more in a calendar year and will be taxed at 1 per cent of the property’s capital improved value. Exceptions include deceased estates, renovations and holiday homes. It is understood to be enforced by investors self-reporting, but could be checked by utility usage. About $2.6 million has been put aside in this year’s budget for “implementation” to undertake additional compliance and monitoring activity.

The tax is intended to encourage investors to either put their property on the rental market, or sell it. Despite a record building boom in Victoria, vacancy rates have remained tight, suggesting many are being kept empty, potentially by offshore investors.

On July 1, the state will also remove the stamp duty loophole for spouses who transfer investment properties to each other to avoid paying tax for “financial planning reasons”. The principal place of residence will be exempt, as will the transfer of properties after a relationship breakdown.

Here’s how else the budget will affect you …

First home buyers

  • The abolishment of stamp duty for first home buyers on properties up to $600,000 and cuts to properties up to $750,000.
  • The doubling of the First Home Owner Grant to $20,000 in regional Victoria.
  • The introduction of HomesVic assistance pilot, a co-purchasing program for up to 400 first home buyers who qualify for housing loans but do not have enough deposit to buy.

Renters

  • The option of long-term leases for landlords and tenants wishing to commit to rental arrangements of more than five years and a website to help them connect with each other.
  • An increase of about 10 frontline specialist staff to help tenants with assistance

Investors/ Home owners

  • Vacant Residential Property Tax of 1 per cent of a property’s capital improved value on properties left unoccupied for six months or more, to be implemented from January 1, 2018.
  • The abolishment of the stamp-duty loophole for spouses who transfer investment properties to each other to be implemented from July 1.
  • Land tax to be calculated annually rather than bi-annually from 2019.

Any Questions?  Ask Darryl Here

Source: Domain

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