The rising costs of residential property in Victoria in recent years has made it difficult for residents to own their own property.
One of the many factors causing this rise in costs is the high level of investment, both from Australian and overseas investors, which increases the value of properties.
To address these issues, the Victorian Government has recently introduced some changes to the taxation and stamp duty obligations surrounding residential property purchases.
These changes are intended to decrease the cost for first home buyers both directly and indirectly.
The direct measures include stamp duty concessions and exemptions, while the indirect measures increase the costs for investors, thus giving home owners a competitive advantage over investors.
While you’re here, be sure to dive deep into the intricacies of the housing market with our detailed article on buying your first home in Victoria. An added resource for keen property enthusiasts!
Stamp duty for first home buyers
For first home buyers purchasing a property for under $600,000, stamp duty will be completely dropped. For properties between $600,000 and $750,000 stamp duty will still apply, however a reduction will apply on a sliding scale. To restrict these concessions to first home buyers:
- Both the purchaser and the purchaser’s partner must be buying their first home;
- The purchaser must be either an Australian citizen, a permanent resident, or a New Zealander holding a special category visa; and
- The property must be the principle place of residence of the purchaser for twelve continuous months.
The following table illustrates how much fist home buyers will save due to the stamp duty concession/exemption:
| Home value | Savings |
| $200,000 | $3,185 |
| $300,000 | $5,685 |
| $400,000 | $8,185 |
| $500,000 | $10,985 |
| $600,000 | $15,535 |
| $700,000 | $12,357 |
This change, if passed by Parliament, will commence on 1 July 2017, and will apply to both new and established properties.
This is in addition to the Principle Place of Residence (PPR) stamp duty concession, available for property purchases up to $550,000, which remains unchanged.
Off the plan concession
Off the plan stamp duty concessions will now be limited to those eligible for the (PPR) and first home buyer tax exemptions and concessions.
The Victorian Government’s purpose of this is twofold: using the additional revenue to fund the above first-home buyers tax exemption and concession, and assisting competition against investors.
What is off the plan stamp duty concession?
An off the plan stamp duty concession can be used when buying a property before construction has commenced.
Instead of the stamp duty being calculated from the value of the finished property, it is calculated from the value at the time of contract.
Who will be eligible for the off the plan stamp duty concession?
- A purchaser who is eligible for a first home buyer stamp duty concession or exemption
- A purchaser who is eligible for a principle place of residence stamp duty concession
This exemption will no longer apply to any other property purchases, including commercial properties and investment residential properties.
For example, say a couple wishes to buy their first home. The house is not yet built but they agree to purchase the property up front for the price of $700,000.
The cost of the land is $200,000 and the cost of the future construction is $500,000.
Since the property is less than $750,000, they are eligible for the first home buyer stamp duty concession (but not exemption).
They will receive an additional off the plan duty concession, meaning that they will only be required to pay stamp duty for the $200,000, not the $500,000 of the future construction.
First Home Owner Grants
The Victorian Government has also announced planned increases in the First Home Owner Grants (FHOG) for newly built homes in regional Victoria.
The grant will be doubled from $10,000 to $20,000 and will apply to homes valued up to $750,000.
Vacant residential property
The Victoria Government has announced its intent to impose a Vacant Residential Property Tax (VRPT) as a measure to increase available rental properties.
The tax rate will be 1 per cent of the capital improved value (CIV) of the taxable property. The capital improved value of your property can be found on your council rates notice.
This tax will only apply to properties in the inner and middle suburbs of Melbourne, which are left vacant for more than six months in a calendar year.
It is recognised that there are many legitimate reasons to leave a property unoccupied and therefore some exemptions from the tax will apply.
These reasons include travelling overseas, using the property as a holiday home or a city home for work reasons and having a property that is part of a deceased estate.
Author bio:
Warlows Legal are property lawyers and can assist with residential or commercial real estate transactions in Melbourne or Sydney.
