The 2021/2022 Victorian state budget is due to be released Thursday, May 20, but the Victorian government has already announced significant tax increases and a new tax affecting property owners:
- Property tax increases for land with an assessed value of $ 1.8 million to $ 3 million, and for land with an assessed value of $ 3 million or more, as follows:
- Exceptional gains are taxable on the total increase in value resulting from a rezoning decision. Gains over $ 500,000 will be taxed at 50%, with the tax rate progressive on earnings from $ 100,000 to $ 500,000. Land subject to the Growth Zone Infrastructure Contribution (GAIC) is excluded from the new tax.
- Land Transfer Tax (AKA “stamp”) increases on land valued for over $ 2 million, with duties calculated at $ 110,000 plus 6.5% of customs value over $ 2 million of dollars.
When will these tariffs come into effect?
Currently, the planned dates are:
What does this mean in practice?
It is expected that the new land transfer tax rates would apply to transactions with contracts dated July 1, 2021 or after. However, this is not clear at this point until the legislation is released. The increased property tax rates will simply apply from the 2022 property tax year.
The Victorian government did not provide many details on how the new windfall gains tax will be applied, including how the increase in value will be calculated or when a tax should be paid. However, as property values can change dramatically following a successful zoning change decision, the upfront payment could make many development projects unfeasible. Given how the Victoria government has allowed the deferral or installment of other development costs in the past, such as GAIC or Melbourne Strategic Assessment environmental mitigation taxes, we are planning a similar approach. for this new tax.
Regardless of when the payment is made, the industry questions whether the negative or unintended consequences will outweigh any benefit obtained by the government. The Victoria area could be hit very hard due to its under-supply of zoned land for housing despite the desperate need for a new supply. Many projects, especially those with a community or social purpose, could become unsustainable, with some developers already halting their plans until they know more information. Many predict that house prices will rise simply to offset higher development costs.