• VCAT

May 1, 2021

Victoria state budget 2021/2022 set to increase stamp duty, land tax and rezoning tax

The Victoria Budget for 2021-2022 was released in May 2021, introducing a number of new measures that will soon be voted on by the Victorian Parliament. A number of measures are directly targeted at the Victorian property sector including both tax increases and concessions.

The major changes include land tax increase by 0.25 per cent for taxable land holdings between $1.8 million and $3 million, and 0.30 per cent for taxable land holdings in excess of $3 million; a new rezoning tax where windfalls above $500,000 would be taxed at 50 per cent, with the tax phasing in from $100,000 and a premium stamp duty for property transactions above $2 million, attracting a $110,000 duty plus 6.5 per cent of the dutiable value in excess of $2 million.

Measures in relation to the property sector announced in the Budget are listed below, along with their expected start date:

Rezoning Tax

New windfall gains tax of up to 50% to be applied to planning decisions to rezone land. The total value uplift from a rezoning decision will be taxed at 50% for windfalls above $500,000, with the tax phasing in from $100,000.

Starting from 1 July 2022.

Stamp Duty

New premium land transfer duty (stamp duty) rate for property transactions with a value above $2 million, increasing stamp duty payable to $110,000 plus 6.5% of the dutiable value in excess of $2 million.

Applies to contracts entered into on or after 1 July 2021.

Land Tax

The land tax rates for high value landholdings will increase for taxable landholdings exceeding $1.8 million by 0.25 percentage points, and for taxable landholdings exceeding $3 million by 0.30 percentage points.

2022 land tax year

Victorian Treasurer Tim Pallas said during the budget announcement, $2.7 billion would be raised by a suite of measures and the “modest” increase would only affect a fraction of the 10 per cent of Victorians who pay land tax, which is not paid on owner-occupied homes. Mr Pallas said the rezoning tax is a move that would claw back around $40 million a year from developers and speculators who made huge profits after a local council’s “stroke of a pen” to rezone industrial land for residential use. According to the state government, the measure is aimed at balancing home buyers wanting to purchase a home and property investors who continue to profit from increasing property values.

Other than the headline tax hikes, the budget also announced other measures aimed at encouraging population into Melbourne CBD apartments:

Stamp Duty Concession within the City of Melbourne

Temporary land transfer duty (stamp duty) concessions for new residential property within the City of Melbourne local government area with a dutiable value up to $1 million. A 50% concession will be available for new residential properties. A full exemption will be available for new residential properties that have remained unsold for 12 months or more since completion of construction.

Concession applies to contracts entered into on or after 1 July 2021 and on or before 30 June 2022

Exemption applies to contracts entered into on or after 21 May 2021 and on or before 30 June 2022

Off-the-Plan Duty Concession

Temporary increase in the eligibility threshold for the off-the-plan duty concession to $1 million for all home buyers.

Applies to contracts entered into on or after 1 July 2021 and on or before 30 June 2023

Victorian Treasurer Tim Pallas said “It’s only fair that those making large profits return a reasonable proportion to the community – this means more Victorians can have the schools, hospitals and support they need and deserve. Our tax system is fair and progressive – making sure that everyone pays their fair share to support Victoria’s economic recovery.”

Sending a Message

The Budget will also revoke land tax concessions for private gender-exclusive clubs such as the Melbourne Club, which has all-male membership. The land tax concessions were intended for not-for-profit societies, rather than “increasingly anachronistic” elite clubs.

“We’re not saying that they’re illegal, we’re simply saying you shouldn’t get the gift of the taxpayer to conduct these bodies and certainly from our point of view the idea of male-only clubs, their time is well and truly passing,” Victorian Treasurer Tim Pallas said. The state government does not expect large savings made in that move, it was more about sending a message to the community.

Private Partnership to Boost Public Housing

The Victoria State Budget 2021-2022 also announced measures that are not tax related. A private-public partnership will create hundreds of social housing units as part of its $5.3 billion public housing build with 1,110 new homes to be built on government-owned land in Brighton, Flemington and Prahran.

The homes will be a mix of 619 social housing dwellings, 126 affordable homes and 365 market rental homes, including 52 specialist disability accommodation dwellings. Under the plan, the government will put in $50 million while a private consortium will provide $465 million upfront to construct the homes. The consortium will have a lease on the sites for 40 years, collecting income from the rent and maintaining the properties while the state government repays the $465 million to the consortium during that 40-year period.

Planning Minister, Richard Wynne, said after that time, all the property and homes would return to government hands to become social housing and “full consultation” with local communities on the design will take place and he hoped to have construction underway before the end of the year.