Victoria stamp duty changes: Hunting the golden goose (to extinction?)

Victoria stamp duty changes

Michelle Bennett looks at the Victorian Government's plans to increase the stamp duty surcharge for foreign buyers of residential real estate.

Partner, Tax

KPMG Australia

Contact

Related content

Toy houses on white puzzle

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:

  • duty on residential property from 3 percent to 7 percent from 1 July 2016 and
  • land tax from 0.5 percent to 1.5 percent from 1 January 2017.

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 “[S]ince 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.

Tax Insights

KPMG Australia's analysis of tax issues and developments.

 
Read more

Indirect Tax Services

Indirect Tax Services

KPMG can assist in all aspects of indirect tax, from education and training, policy, compliance and technology through to audits and disputes.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform