Is a new levy or tax in store for Property Developers in Victoria?
The Victorian Government were about to announce that from 1 July 2024, new Victorian developments of dwellings/subdivisions of three or more would contribute towards a new tax that will support social housing growth.
Less than a week later, the Andrew's Government has had to review the policy due to opposition from the Liberal Party, councils and property developers. Now, it has been withdrawn in its current format, for now.
What was the levy?
Targeted at dwellings in Melbourne, Geelong, Ballarat and Bendigo, the new levy will be based on 1.75% of the as-if-complete market value of the development. In practical terms, on a home valued at a Melbourne price of $1m, the levy would equate to about $17,500.
Victoria’s treasurer, Tim Pallas, said the levy would raise more than $800 Million annually, though it would only impact around 30% of all residential planning permits. “This is a big, generational reform,” Pallas told reporters at the announcement.
However, Premier Daniel Andrews has since told reporters, "It's fair to say the future of this bill is very, very uncertain." The government is now collating additional modelling for parliament to consider.
Benefits & Impacts
The levy would be positive news for social housing in Victoria, with the scheme to indirectly provide funding for up to 1,700 new social houses. Additional employment opportunities are another benefit.
The State Government also proposed that social housing properties would be exempt from paying council rates from 2023, as the reform will be phased in over four years.
While the intent is positive, the potential offset is the impact on the cost of affordable housing, an issue being raised by many in the property industry. Specifically, this includes first home buyers, as they are more likely to consider property like house and land packages in growth areas subject to the levy.
The Property Council of Australia states that while they support planning reform, the potential impact of this policy change could see the median house precise in Melbourne's west increase by $21,525 and in Geelong by $11,725. Councils are also concerned about rate exceptions and possible across the board increases to cover deficits caused by rates exemptions. Other commentators are downplaying these impacts on rates as insignificant.
A growing list of Property Taxes for Victoria
There are calls for the initiatives to be founded on a broad based funding approach due to the growing complexity of the State's taxation system and its reputation as a costly place to do business. Victorian property-related taxes also include:
- Land Tax
- Tax on windfall gains upon rezoning
- Absentee Owner Surcharge (“AOS”) for absentee owners
- Vacant Residential Land Tax
- Foreign Purchaser Additional Duty
- Economic Entitlements Tax
- Growth Areas Infrastructure Contribution (“GAIC”)
- Duties on Fixed Assets Transfers
Perhaps this presents an opportunity for legislators to consolidate these taxes to create a simpler model for all.
More information?
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