The 2021 Victorian State Budget contained some rather unwelcome tax news for higher end property buyers in the state. Despite changes late last year in the state to encourage first home buyers with stamp duty concessions, we have seen the reverse applied for those looking to purchase more expensive homes.
The key tax changes that were announced in the Budget are as follows
The current land tax rates for properties in Victoria are as follows:
Unfortunately, for those looking to buy in Victoria, the Land Tax rate will be increased for the $1.8M to $3.0M category by 0.25%, while the $3M and above category will see an increase of 0.3%. To put this in perspective, a 0.3% increase on a property with a dutiable value of $3M, would see an additional cost of $9,000.
It is estimated that the increase to Land Tax for more expensive properties will generate an additional $1.5 billion over a 4 year period and is set to come into force from 1 January 2022.
Often referred to as an inefficient and lazy tax, stamp duty will also see an increase in Victoria for property buyers. The current rates of the stamp duty in Victoria are as follows:
The Victorian State Government has identified a ‘premium’ stamp duty rate of 6.5%, which would apply for all properties above a purchase price of $2M. To put this into perspective, the additional 1% on a $2M property would equate to an additional $20,000 that the buyer would be forced to cover.
The Victorian State Government has estimated that this change to stamp duty will generate an additional $761M over a 4 year period, and is set to come into effect from 1 July 2021.
The overall impact of these changes on the property market in Victoria remains to be seen, however, we do not see it having a dire effect on housing. It will, however, certainly mean that greater planning will be required in terms of how loans are structured, additional land tax or stamp duty are covered as well as considering your tax efficiencies
If you have any questions about how these changes could impact you, please reach out and let us know.
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