Property is costing more to own and develop
Significant changes to State property tax regimes are impacting a range of property stakeholders. It is important to be aware of the initial and annuity costs that exist now and the pending changes from 1 July 2024.
Types of Property Tax in Australia
Property taxes differ materially across states, an important consideration for property investors that hold multi-jurisdictional assets.
There are several property taxes across Australia that are levied on an acquisition event and as an ongoing annuity cost. The most significant of these are stamp duty and land tax.
| Tax Type | Application Type |
| Land Transfer Duty (Stamp Duty) | Transaction Based |
| Foreign Purchaser additional duty | Transaction Based |
| Windfall Gains Tax | Transaction Based |
| Land Tax | Annuity |
| Vacant Residential Land Tax (VRLT) | Annuity |
Property Developers and owners of rezoned land will already know about Victoria's Windfall Gains Tax, which is now in place.
There are a number of exemptions and concessions, so it is important to check if they apply to your circumstances. For example, a stamp duty concession of 50% is available when buying property in regional Victoria when used for commercial, industrial or extractive industry purposes. The concession applies to property currently being used for these purposes, as well as property converted to one of these uses.
Comparing Land Tax between States
It is an interesting exercise to compare property taxes across a few states.
Land tax is based on the total taxable value of land holdings, usually, the site value found on council rate notices. It is calculated by applying the appropriate land tax rate to the total taxable value of land holdings, excluding exempt land such as your home.
The impact of the recent tax changes, including the debt levy in Victoria, across the eastern seaboard is reflected in the table below:
| Taxable Value | VIC | NSW | QLD |
| $500,000 | $1,950 | $0 | $0 |
| $1,000,000 | $4,650 | $0 | $4,500 |
| $2,000,000 | $15,150 | $14,900 | $21,000 |
| $5,000,000 | $84,650 | $62,900 | $62,500 |
From the 2024 land tax year, an absentee owner surcharge of 4% applies to Victorian land owned by an absentee owner. An additional 4% applies in NSW to all residential land owned by foreign persons.
Overall, Land Tax is really starting to bite, especially as the value of land increases.
Comparing Stamp Duty
When buying or acquiring property, you must pay land transfer duty, often known as stamp duty. Property is commonly bought or sold at auctions or by private sale, but can also be gifted or acquired through a company or trust.
Duty is calculated on the price paid for the property or its market value, whichever is greater. It is calculated by the appropriate stamp duty rates, excluding properties types or scenarios where there are exemptions or concessions.
Stamp Duty Input Variables
These inputs mainly impact residential property. These are the common questions to consider that impact the rate of property tax you are required to pay:
- Property in regional areas for commercial, industrial or extractive industries use?
- Are you a foreign purchaser?
- Are you purchasing residential property?
- Is this a new residential home, established home or vacant land?
- Is it your principal place of residence (PPR)?
- Is it your first home?
The impact of the changes recently across the eastern seaboard is reflected in the table below (assuming no exemptions apply):
| Taxable Value | VIC | NSW | QLD |
| $500,000 | $25,070 | $17,235 | $15,925 |
| $1,000,000 | $55,000 | $39,735 | $38,025 |
| $2,000,000 | $110,000 | $93,055 | $95,525 |
| $5,000,000 | $305,000 | $280,480 | $268,025 |
A premium rate of 7% applies to the transfer of residential property in NSW if the value exceeds $3,505,000.
Stamp Duty Calculators are useful for assisting you to clarity what inputs or exemptions apply to your situation.
Victoria: State Revenue Office Victoria Stamp Duty Calculator
New South Wales: Revenue Office NSW Stamp Duty Calculator
Queensland: Queensland Revenue Office Stamp Duty Calculator
Victoria a clear winner
With impact of the changes from the 2024 tax year, Victoria remains the most expensive state to transact for property in most scenarios.
The Real Estate Institute of Victoria Ltd. (REIV) is advocating strongly for a review of land transfer duty fees. Their recent February submission for the 2024-2025 Victorian State Budget "urges the Victorian State Government to initiate a comprehensive review of property tax policies and policy proposals pursuant to attracting and retaining investment in the sector." They argue that effective land tax concessions will stimulate rental stock by incentivising investment.
However, commercial and industrial property purchasers from July 2024 have some relief as detailed below.
Commercial & Industrial Property – Stamp Duty Reform (Victoria)
Victorian stamp duty changes from July 2024 impact the purchasing of commercial and industrial properties. Existing properties purchased before this date will not be impacted.
There will be a transition period where the first purchaser of commercial or industrial property on or after 1 July 2024 will be required to choose to either:
- Pay the stamp duty liability as an upfront lump sum as normal; or
- Use a Government 'transition loan' and pay the stamp duty liability (plus interest) over a 10 year period.
Consistent with land tax, the Commercial and Industrial Property Stamp Duty cannot be passed through by landowners to specific retail tenants identified in the Retail Leases Act 2003.
What about Business?
Businesses are exempt from transfer duty in all states. The NSW government abolished transfer duty on the sale of business assets on 1 July 2016, including intellectual property, goodwill and statutory licenses.
For advice specific to your scenario, please contact us for more information.
www.mcpfinancial.com.au