The Victorian Government has announced a new windfall gains tax which will ‘claw back’ an estimated $40 million each year.
Developers and speculators will face a windfall gains tax of up to 50 per cent applied to planning decisions to rezone land from 1 July 2022, which the Government said will ‘ensure multi-million dollar overnight profits are shared with the community’.
The total value uplift from a rezoning decision is proposed to be taxed at 50 per cent for windfalls above $500,000, with the tax phasing in from $100,000, which the Government said will ensure ‘the vast majority of land holders will not be affected’. Land subject to the Growth Areas Infrastructure Contribution will also not be affected.
The Victorian Government said that for too long, private gender-exclusive clubs have benefited from land tax concessions while discriminating against half the population.
From 1 January 2022, private gender-exclusive clubs will no longer receive the land tax concession reserved for charities, clubs and associations – bringing them into line with other private organisations liable to pay land tax on their landholdings.
Tax on large land holdings will increase, a move which the Government said will raise more than $380 million per year on average for the community over the budget and forward estimates. From 1 January 2022, the land tax rate will rise by 0.25 percentage points for taxable landholdings exceeding $1.8 million and 0.30 percentage points for taxable landholdings exceeding $3 million.
The Government will also bring in a new premium stamp duty rate for property transactions with a value above $2 million, increasing stamp duty payable to $110,000 plus 6.5 per cent of the dutiable value in excess of $2 million. This change is expected to impact less than 4 per cent of transactions.
Industry response to the measures
The Property Council of Australia, Housing Industry Association, Urban Development Institute of Australia (Victoria) and the Real Estate Institute of Victoria have called on the State Government to partner with the industry to build Victoria’s COVID-19 recovery, rather than ‘rely on inefficient taxes which threaten jobs and housing affordability to hike revenue’.
A joint statement by the organisations highlights that the property and construction industry employs one in four Victorians and contributes well over half of the state’s tax revenue already. The industry’s economic contribution to the state of Victoria is larger than mining, agriculture, and manufacturing combined.
The industry associations voiced their grave concerns that the additional and new taxes will cripple Victoria’s economic recovery, just as the state is finding its feet after the longest lockdown in the nation.
“We need to band together to help Victoria recover from the worst economic and health crisis in modern history. We want to build a long-term and sustainable future for our state. Hiking taxes and threatening housing affordability, jobs and investment is not the answer,” they wrote.
“We are disappointed the Andrews Government has not responded accordingly and we call on them to reconsider these tax changes which could have grave implications for the state.”
“We want to partner with Government for the best possible recovery. But further taxing Victorians through the housing market is not the answer.”
Danni Hunter, Victorian Executive Director, Property Council of Australia said: “Victoria has one of the country’s highest unemployment rates at 6.1 per cent. The property industry employs 25 per cent of Victorians but relies on a solid pipeline of development, construction and new housing projects in order to maintain this level of employment. These tax changes put at risk our hard-earned economic recovery.”
“We urge our government to focus on creating more jobs and growing our economy, not penalising investment and increasing cost and risk.”
Fiona Nield, Victorian Executive Director, Housing Industry Association said it is unfair to tax landowners further on property when Victoria already has the highest stamp duty rates in the country.
“The new windfall gain tax is particularly concerning and appears to take a disproportionate share of property value from landowners that are in fact helping to support the growth in housing supply that helps keep affordability in check across regional Victoria,” she said.
Matthew Kandelaars, Chief Executive Officer of the Urban Development Institute of Australia (Victoria) commented: “It defies belief that anyone could seriously think you can address housing affordability by increasing taxes on homes and development.”
“Victorians are already paying more than a third of the price of a new home directly to the Government through taxes, charges and levies and these increases will hurt Victorian families at every level of the housing market.”
Leah Calnan, President of the Real Estate Institute of Victoria added: “These ill-considered and poorly conceived taxes could cause a flight from the property sector by thousands of self-funded retirees, many of whom have property investment as their only form of income. They show a fundamental misunderstanding of the real estate market, and the contribution it makes to the economy.”
“At a time when commercial property landlords are struggling to find tenants, especially in Melbourne’s treasured CBD, the increased taxes will put an extra burden on the commercial sector, which was one of the strongest supporters to Victoria’s COVID-19 lockdowns.”