Property Downturn Deals $5.2bn Blow to VIC Budget

By Aldo Galante May 30, 2019

Here is an interesting article on property taxes prepared and kindly provided by Nelson Yap of the Australian Property Journal.

The Victorian government will lift property taxes in the upcoming budget, particularly for foreign buyers, in a bid to offset a $5.2 billion shortfall in stamp duty revenue due to the slowing real estate market. 

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Treasurer Tim Pallas said on Saturday that the decline in residential property market will result in the government collecting $1.3 billion less a year for the next four years.

"We of course are dealing with a difficult situation with regard to the property market but it is one we are managing," he said.

Foreign buyers will bear the brunt of the property tax increase, with the foreign investor duty jumping from 7% to 8% from July 1 this year and 3,000 foreigners will also face a higher absentee owner tax, which will rise from 1.5% to 2% from January 1 next year.

The biggest hit will be on foreign buyers with an increase in duties and a rise in the absentee owner land tax surcharge.

Pallas said the measures which are expected to raise an additional $330 million over four years, will bring Victoria in line with NSW.

"Victoria is almost 50% of all foreign purchases of residential property, so aligning with NSW should cause little damage to what is clearly a very enthusiastic foreign purchasing market," Pallas added.

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Victoria is already one of the most expensive places to purchase for a foreigner. Prior to the upcoming budget changes, the foreign buyer surcharge was $35,000 versus NSW's $40,000, according to Pitcher Partners.

A reported released by Foreign Investment Review Board in February shows foreign investment in Australia has fallen by $55 billion in two years with Chinese buyers citing higher taxes and surcharges as one of the reasons for their withdrawal.

Investment in residential real estate has declined for the second year in row. According to FIRB, 10,036 applications were approved worth $12.5 billion - down 3,162 approvals and a $17.5 billion from 2016-17. It is a well down on the 2015-16 peak where there were 40,141 approvals worth $72.4 billion and 36,841 approvals worth $60.7 billion in 2014-15.

Investment in residential real estate is now at its lowest level since the GFC, where there were 3,723 approvals valued at $8.77 billion in 2009-10.

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The Victorian government will also clampdown on land bankers. Pallas said this measure is aimed at people who are not genuinely using the vacant land for their residence.

Approximately 1,700 property owners will be required to pay land tax on the vacant land they own next to their homes, unless they pay $600 to consolidate titles.

Pallas said this crackdown will also bring in around $43.6 million over four years.

Australian Property Journal


Please note GormanKelly does not warrant the accuracy of the information detailed above which has been prepared and supplied by a third party.

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Aldo Galante

Written by Aldo Galante

For over 30 years, Aldo has been at the forefront of Australia’s fast-evolving property industry. He served as President of the prestigious Australian Property Institute (Vic), providing determinations on rent-reviews and valuations

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