Changes are on the horizon in Victoria as the government announces that it is to abolish stamp duty for commercial and industrial properties. In a landmark move, these properties will transition to an annual property tax, propelling the state’s economy with an estimated injection of $50 billion.
Transitioning to the Annual Property Tax System
Starting from July 1 next year, commercial and industrial properties will transition to the new system upon sale, and the annual property tax will become payable from 10 years after the transaction.
Under the new system, the first purchaser of a commercial or industrial property after July 1, 2024, will have the option to pay the property’s final stamp duty liability as an upfront lump sum or choose fixed instalments over a 10-year period, including interest, facilitated by a government-transition loan.
The annual property tax will be set at a flat 1% of the property’s unimproved land value. It is important to note that these changes do not apply to residential properties.
The Victorian Chamber of Commerce and Industry CEO, Paul Guerra, has welcomed these changes.
“This is exactly the type of progressive tax reform that is required to free up stamp duty charges which will accelerate building upgrades, stimulate investment in commercial property and free up more capital.”
Rolling back NSW reforms
In a turn of events, the Minns government in NSW is initiating the process of scaling back the stamp duty reforms unveiled on residential properties just six months ago by the former Perrottet government. Premier Chris Minns is poised to introduce legislation in parliament this week, seeking to abolish Dominic Perrottet’s prominent housing affordability package. This package offered first home buyers the choice between paying stamp duty or opting for a lower annual property tax on homes valued up to $1.5 million.
Originally intended as an initial step toward a comprehensive overhaul of stamp duty in the state, the package had been consistently highlighted by Mr. Perrottet as a hurdle preventing young buyers from entering the property market. Mr. Perrottet promoted the initiative, stating that the associated data suggested it could shorten the time required to save for a housing deposit by 18 months. However, the initiative became a central topic during the election when Labor leader Mr. Minns voiced his opposition, arguing that it favoured wealthier homebuyers.
Seeking a Balanced Approach
As an alternative, Mr. Minns proposed an extension of the existing stamp duty exemption for first homebuyers, raising the outright exemption threshold to homes valued up to $800,000 and offering a concessional rate for homes valued up to $1 million. The legislation aiming to repeal the First Home Buyer Choice package is anticipated to gain approval in the lower house of the state’s parliament with support from the Greens and at least two independents, whose backing is crucial for the Minns government’s minority position. It is also likely to pass through the upper house.
Stay tuned for more updates as the Victorian government forges ahead with its stamp duty reforms and the implementation of the annual property tax system.
Author – Pamela Perry
*Correct as of 26 May 2023
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