Michelle Bennett looks at the Victorian Government's plans to increase the stamp duty surcharge for foreign buyers of residential real estate.
Less than a year after the introduction of a range of tax surcharges on non-residents, the Victorian Government has announced plans to drastically increase the rates.
On Friday, Victorian Treasurer, Tim Pallas, revealed that the 2016/17 Victorian Budget would increase the surcharges for:
This will mean an effective land tax rate of 3.7 percent and duty rate of 12.5 percent for affected non-residents.
The Victorian Treasurer’s media release stated “Since we introduced these surcharges last year, there has continued to be a welcome and steady stream of foreign interest in our residential real estate. The surcharges ensure that buyers will continue to benefit from the best services and infrastructure.”
With the original duty surcharge only taking effect on contracts signed after 1 July 2015 and the land tax changes applying from 1 January, there is now an open question on how the original and now proposed change might impact the Victorian market.
Indeed, a tripling of the land tax surcharge will likely cause many landowners to seek an exemption who were previously prepared to absorb a 0.5 percent surcharge, adding to the existing backlog of applications under consideration by the State Revenue Office.
Sensible moves to support local homebuyers and renters, and reduce the many negative impacts of residential property sitting vacant, will certainly garner public support. But if these taxes are intended to respond to those challenges they seem a particularly blunt weapon.
Maybe the Victorian government is anticipating that other states will follow in its footsteps and introduce equivalent surcharges? If not, the golden goose won’t necessarily sit here waiting to be plucked: if the temperature drops too far it can always fly north for the winter.