Victoria is scrapping stamp duty for first home buyers on properties worth up to $600,000, while cracking down on concessions for off-the-plan investment properties.
Just days after premier Daniel Andrews announced plans to double the first home owners grant from $10,000 to $20,000 for people building a new house in the country, yesterday he announced further changes to government duties on property in the state.
Stamp duty will be abolished for first home buyers for purchases below $600,000. Properties valued between $600,000 and $750,000 will also be eligible for a concession, applied on a sliding scale.
The exemption and concession applies to both new and established homes, and the government estimated 25,000 people will take up the offer.
But things will get more expensive for investors, with the off-the-plan stamp duty concessions on investment properties scrapped, applying only to people who intend to live in the property or are eligible for the first home buyer concession.
And the government will hit investors with a 1% “Vacant Residential Property Tax” based on the improved value of a taxable property. That means investors with a home worth $500,000 will pay $5,000 in tax if they don’t rent the place out. The tax will target homes around the inner and middle suburbs of Melbourne.
Andrews said there will be exemptions for a property being left vacant, including holiday homes, deceased estates and Victorian residents who temporarily overseas. The premier has yet to outline the timeframe before a property is vacant for too long.
“With negative gearing and capital gains tax concessions, the odds are already stacked against first home buyers. This will help level the playing field,” he said.
The tax will begin on January 1, 2018, and is expected to raise $80 million over four years.
But the changes have been criticised by KPMG state taxes partner Michelle Bennett, who said the loss of the off-the-plan concessions for investors for halt residential investment.
“The Victorian government has swapped the sledgehammer it wielded when imposing significant tax surcharges on overseas buyers for a housing affordability scalpel, in a more targeted and policy-based tax reform,” she said.
“But there are risks in reducing off-the-plan concessions for investors, as it could put the brakes on new residential development. That would run counter to the purpose of a ‘vacancy tax’ in driving rental availability.
“Details of the anticipated exemptions for the vacancy tax will be critical in ensuring that revenue projections – and stock increases – are actually realised.”
In another move to tackle housing affordability in the state, Andrews also announced a $50 million pilot scheme, HomesVic, targeting first home buyers who haven’t been able to save a deposit.
Under the scheme from January 2018, HomesVic will co-purchase up to 400 homes, taking up to a 25% equity share in new and existing homes.
Eligible applicants will include couples earning up to $95,000, and singles earning up to $75,000. Buyers will need a 5% deposit. When the properties are sold, HomesVic will recover its share of the equity.
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