In a bid to making housing more affordable for Victorians amidst a housing shortage crisis, the State Government has proposed several new tax changes affecting first home-buyers and investors alike.
Achieving the great Australian Dream of owning your own property with a back yard for the kids and dog will soon become a bit more reachable for first home-buyers. The Victorian Government announced last week that first home buyers will be exempt from stamp duty tax if the property is valued at under $600,000.
The proposed scheme is set to start on 1 July and proports to benefit 25,000 Victorian first home buyers every year, saving $15,535 stamp duty on a $600,000 property. For homes valued between $600,000 and $750,000, tax discounts will be applied on a sliding scale.
Further good news is the exemption and concession, unlike the first home owners grant, will apply to both new and established homes.
“In the past, if you worked hard and saved enough, you could afford to buy your own home. Now, that’s getting harder and harder,” Premier Mr Daniel Andrews said. “These changes will help thousands of Victorians make the great Australian dream a reality.”
The suite of tax changes proposed by the Victorian government may not be so welcomed by investors.
Off-the-plan stamp duty concessions will only continue to be available for those buyers who intend to live in the property, the government has announced. For investors, this means they will no longer be able to benefit from the off-the-plan concessions and the amount of stamp duty payable on investment properties purchased off-the-plan will therefore revert back to normal.
The government is making these sweeping changes to increase housing affordability, and although not yet clear, the removal of the off-the-plan concession may not apply to non-residential properties. Properties such as commercial buildings, hotels, factories etc. These changes are also expected to come into effect on 1 July.
As part of the Government’s strategy to tackle the rising housing shortage, owners who leave properties vacant will also be imposed with a new tax.
The new Vacant Residential Property Tax has been introduced in an effort to address the number of properties being left empty across Melbourne. By making these vacant houses available for sale or lease, the government hopes to alleviate some of the shortage.
Starting on 1 January 2018, for owners leaving properties unoccupied for more than six months a calendar year, they will be levied at one per cent multiplied by the capital improved value. Accordingly, the owner of a vacant apartment with a CIV value of $500,000 will pay an additional $5,000 tax per annum. It is expected to raise about $80 million over four years in state revenue.
A further plan to address housing affordability for first home-buyers has prompted the Victorian government to introduce a $50 million pilot scheme called “HomesVic”.
The scheme aims to help people who are unable to save a sizeable deposit due to high rental prices, buy a property in partnership with the government. Launching on 1 January 2018, the scheme will provide eligible first home buyers an opportunity to enter the property market sooner.
The government will provide 25% of equity on the property, leaving a much more affordable and attainable price tag for people. In turn this will mean smaller mortgage repayment and an overall upfront deposit. Eligible applicants include singles earning up to $75,000 and couples earning $95,000 who must provide 5% deposit upfront.
The pilot will be tested across Victoria, and when the properties are sold, HomesVic will recover its share of the equity.
The proposed tax changes are complex and will profoundly affect foreign purchasers of property. Verity Law will be there every step of the way to resolve our clients’ concerns. Should you have any questions please contact our office on (61) 3 9939 8588. You can rest assure that Verity Law will be with you every step of the way