This article is from the Australian Property Journal archive
THE property industry has welcomed the Victorian Government's initiative to provide over $900 million of property tax cuts in the 2008/2009 state budget.
Property Council’s executive director Jennifer Cunich said the $490 million worth of land tax relief and $422 million in stamp duty cuts are crucial to improve Victoria’s competitive standing as an investment destination.
“Land tax is a year on year impost to investors, small, medium and large property owners. Recent spikes in land valuations means the Government needed to act now. We commend the Government for taking action,” she added.
Yesterday, Treasurer John Lenders said cut stamp duty tax by almost 17% for first home buyers – on top of the existing first home buyers’ assistance worth up to $12,000.
Table 1: Cuts for First Home Buyers
|
Purchase price |
Previous Duty |
New Duty Payable |
Savings ($) |
Savings (%) |
|
$200,000 |
$7,660 |
$6,370 |
$1,290 |
17% |
|
$300,000 |
$13,660 |
$11,370 |
$2,290 |
17% |
|
Median first home $317,000 |
$14,680 |
$12,220 |
$2,460 |
17% |
|
$400,000 |
$19,660 |
$16,370 |
$3290 |
17% |
|
$500,000 |
$25,660 |
$21,970 |
$3690 |
14% |
And for the first time, an additional $3000 bonus will be available to first home buyers buying a new home in regional Victoria.
The Government is also reforming tax, the top land tax rate will be reduced by 10% from 2.5% to 2.25%.
In addition, land tax thresholds will increase by around 10% to relieve the pressure on land owners.
As a result of these changes, all Victorian businesses with land holdings valued between $400,000 and $5.7 million will pay less land tax than they would in New South Wales and Queensland.
Table 3: Land Tax
|
Land Value |
NSW |
QLD (Companies) |
VIC – Current |
VIC – New |
Savings |
Savings |
|
$225 000 |
$0 |
$0 |
$250 |
$0 |
$250 |
100% |
|
$500 000 |
$2 468 |
$4 500 |
$800 |
$775 |
$25 |
3% |
|
$1 million |
$10 468 |
$12 375 |
$3 480 |
$2 975 |
$505 |
15% |
|
$2 million |
$26 468 |
$30 000 |
$13 380 |
$11 975 |
$1 405 |
11% |
|
$3 million |
$42 468 |
$45 000 |
$29 980 |
$24 975 |
$5 005 |
17% |
|
$4 million |
$58 468 |
$60 000 |
$54 980 |
$47 475 |
$7 505 |
14% |
The Property Council also welcomed the Government’s intention to extend corporate reconstruction relief to certain real estate investment trusts in line with recent changes to Commonwealth capital gains tax relief. The stamp duty relief will allow these trusts to operate more efficiently and competitively with international markets. This is an important announcement for the capital markets sector.
The Property Council notes the Government has reaped a windfall of over $4 billion in property taxes on top of budgeted revenue since 1999. Of particular concern is the lack of fundamental reform in stamp duty.
“We welcome measures to make housing more affordable. However we know that reform of commercial stamp duty is achievable now,” Cunich said.
Research prepared by Access Economics this year showed the Victorian Government could afford to reduce the top rate of commercial stamp duty to 4.5% and land tax to 1.5%.
“Under the original Inter-governmental Agreement on the GST, stamp duty on commercial property was earmarked to go. The deal might have changed, but the facts remain. Stamp duty on commercial property stifles investment and economic growth. Despite the significant growth in property values, the rates are effectively unchanged for over 20 years.
“The Property Council urges the Victorian Government to extend its tax reform program to address stamp duty on property, insurances and the woeful car parking levy,” Cunich concluded.
Australian Property Journal
