Big News!

The Victorian Budget for 2023-24, announced on May 23, 2023, introduces changes to land tax rates. These changes  will include higher land tax and absentee (foreign) surcharge rates, which will eventually increase costs for property owners.

I know the feeling.

Moreover, the budget presents land tax concessions that could benefit certain homeowners and home buyers.

The Land Tax Assessment Amendment (Build-to-Rent) Bill 2023 provides a 50% exemption on land tax for qualifying build-to-rent developments. This exemption can last for a period of up to 20 years.

It may be hard to believe but build-to-rent developments are housing projects intentionally constructed to offer multiple residential dwellings for leasing through residential tenancy agreements.

Effective from July 1, 2023, the Sharing Economy Reporting Regime will be implemented. This regime involves the Australian Taxation Office (ATO) receiving data from various electronic distribution platforms, particularly ride sourcing services and short-term accommodation providers. The ATO will cross-reference this information with tax returns to identify any unreported income.

Being an experienced property investment advisor, I am well aware of the profound influence that tax law amendments can have on your investment approach.

Do you see where we’re going with this?

The recently revealed Victorian State Budget for 2023-24 introduces noteworthy modifications to the land tax system.

These alterations, slated to take effect in the upcoming 2024 land tax year, are the focal point of this blog. Its purpose is to elucidate these changes and provide you with insights into how they might affect your property investments.

Let’s begin…

Key Changes to the Land Tax System in Victoria

Starting from the 2024 land tax year, a temporary surcharge on land tax will be introduced specifically to help repay Victoria’s COVID-19 debt. The surcharge will be implemented alongside the existing land tax and will be in effect for a duration of ten years.

• The surcharge will vary depending on the value of the landholding. 
• For taxable landholdings valued between $50,000 and $100,000, a flat surcharge of $500 will be applied. 
• For taxable landholdings valued between $100,000 and $300,000, a flat surcharge of $975 will be levied. If the taxable landholdings exceed $300,000, a flat surcharge of $975 will be imposed, along with an increased land tax rate of 0.10 percentage points.
• Trusts subject to surcharge land tax will also experience adjustments. 
• Taxable landholdings valued between $50,000 and $100,000 will incur a flat surcharge of $500. 
• Taxable landholdings valued between $100,000 and $250,000 will have a flat surcharge of $975. 
• Taxable landholdings surpassing $250,000 will be subject to a flat surcharge of $975, along with an increased land tax rate of 0.10 percentage points.

Understanding Stamp Duty in NSW

The New South Wales government is introducing new legislation to simplify and make the stamp duty concession scheme fairer for first home buyers. The scheme, which will take effect on July 1, 2023, is expected to benefit around 86,000 first home buyers each year and save them a total of $1.1 billion in stamp duty over the next four years.

Fascinating, isn’t it?

Image source – nsw.gov.au

The key changes to the scheme include:

• Raising the threshold for stamp duty exemptions for first home buyers from $650,000 to $800,000.
• Applying stamp duty concessions to properties valued between $800,000 and $1 million.
• Replacing the existing First Home Owner Grant of $15,000 with the First Home Buyers Assistance scheme.
• Extending the residency requirement for first home buyers from six months to twelve months.
• Discontinuance of the First Home Buyer Choice (FHBC) scheme starting from July 1, 2023.
• The new scheme is designed to make it easier and more affordable for first home buyers to get into the property market. It is also expected to help to reduce the cost of living for first home buyers and boost the economy.

The legislation is expected to be passed by parliament in the coming weeks. The new stamp duty concession scheme will take effect on July 1, 2023.

The Impact of the Stamp Duty Concession Scheme

The New South Wales government is making changes to its stamp duty system for first home buyers. These changes aim to make it easier and more affordable for first-home buyers to get into the property market.

One of the key changes is the expansion of the First Home Buyers Assistance Scheme (FHBAS). Under this scheme, first-home buyers purchasing properties valued up to $800,000 will be exempt from paying stamp duty. This means that first-home buyers can save up to $31,090 on stamp duty.

Another key change is the discontinuation of the First Home Buyer Choice (FHBC) scheme. Under the FHBC scheme, first-home buyers had the option to pay property tax instead of stamp duty. However, the FHBC scheme was not widely used and was seen as being unfair to first-home buyers who purchased properties at the higher end of the price range.

The changes to the stamp duty system are expected to benefit around 86,000 first home buyers each year. It is estimated that the changes will save first home buyers a total of $1.1 billion in stamp duty over the next four years.

If you are a first-home buyer, it is important to understand how these changes to the stamp duty system will affect you. You can find more information on the NSW government website.

Here are some of the key things to know:

• The threshold for stamp duty exemptions will be increased from $650,000 to $800,000.
• Stamp duty concessions will be available for properties valued between $800,000 and $1 million.
• The First Home Buyer Choice (FHBC) scheme will be discontinued.
• The First Home Buyers Assistance Scheme (FHBAS) will be expanded.
• These changes are expected to make it easier and more affordable for first-home buyers to get into the property market. If you are a first-home buyer, I encourage you to learn more about the changes and how they will affect you.

How Should You Navigate Through This New Landscape?

Victoria’s land tax system has recently undergone some significant changes. These changes will have a major impact on property owners and investors, so it’s important to understand them and plan accordingly.

One of the biggest changes is the introduction of a new surcharge for land tax. This surcharge will apply to properties with a taxable value of more than $1 million. The amount of the surcharge will vary depending on the value of the property.

Another major change is the increase in the tax-free threshold for land tax. This threshold is the amount of taxable value that is exempt from land tax. Tax free threshold has been reduced from $300,000 to $50,000) Please update this and I have updated the next paragraph as that has different impacts to what was written.

These changes are likely to have a financial impact on property owners and investors. The changes may mean that they will have to pay more land tax.

It’s important to assess how these changes will affect you specifically. 

You can do this by using the online land tax calculator provided by the Victorian government. Or you can also consult with a qualified tax advisor to get personalised advice.

As a property investor, it’s important to stay informed about these changes and understand how they may affect your investment strategy. This means that you should start by considering your long-term goals and then make investment decisions that will help you achieve those goals.

The recent changes to Victoria’s land tax system may create new opportunities for investors. For example, you may be able to purchase a property with a higher taxable value and still pay the same amount of land tax. However, it’s important to carefully consider all of the factors involved before making any investment decisions.

By staying informed about the latest changes to Victoria’s land tax system and understanding how they may affect you, you can make informed investment decisions that will help you achieve your financial goals.