The Victorian State Budget 2017 introduced on the 2nd of May 2017 included a number of changes in relation to property measures aimed to improve the affordability for first home buyers. However, where there are winners, there are losers. In this Budget, the losers were the real estate investors.
Every year, 25,000 Victorians break into the housing market and are made to compete against investors who have got more equity, income and experience. On top of that, the rise in property prices makes it much more difficult for first home buyers to even step foot into the housing market.
The Budget included the exemption of stamp duty for first home buyers up to a purchase price of $600,000 with a tapered discount from $600,001 – $750,000, the doubling of the first home buyer grant from $10,000 to $20,000 in regional Victoria, the removal of stamp duty concessions for investors purchasing off-the-plan property as well as the transfer of ownership between spouses and the introduction of Vacant Residential Property Tax.
We shall look into the changes below:
The exemption of stamp duty for first home buyers
Properties purchased under $600,000 by first home buyers from the 1st of July 2017 will be exempted from paying any stamp duty, saving first home buyers up to $15,000 on stamp duty for both new and existing properties. There will also be a tapered discount for properties purchased between $600,001 up to $750,000.
First Home Owner Grants for properties purchased in regional Victoria
The reform also doubled the first home owner grant (FHOG) from $10,000 to $20,000 for individuals who are purchasing newly built properties in regional Victoria for prices up to $750,000. This grant will apply to first home buyers who sign a contract after 1st of July 2017 and will be effective up until 30th of June 2020.
The removal of stamp duty concession for investors purchasing an off-the-plan property
Unfortunately, the May budget wasn’t too friendly to property investors in regards to stamp duty concession permitted previously for off-the-plan investment property or commercial property purchases. The discounted rate is now only applicable to first home buyers and owner-occupiers. Therefore, if you are a property investor planning to purchase an off-the-plan property, it would be recommended to sign a contract before 30th of June 2017 to be considered eligible for the stamp duty discount.
Introduction of Vacant Residential Property Tax
A new Vacant Residential Property Tax has been introduced in order to encourage investors to put their property up in the market or to make it available for rent.
Properties that have been left unoccupied for six or more months in a calendar year will now have to pay a 1% tax rate of the property’s capital improved value. This will come into effect from the 1st of January 2018 for properties that have been left unoccupied from the 1st of July 2017. This will be self reported by the investors themselves; however utility usages will also be used to check if it is occupied.
Properties that will be exempted from this rule include deceased estates, properties under renovations, holiday homes and homes that are temporarily vacant as the owner is for example; temporarily overseas.
The removal of exemption of stamp duty when transferring ownership to spouses of investment property
A loophole that was discovered was that spouses and de facto partners were able to transfer investment and/or commercial properties to their spouses and de facto partners to avoid paying tax. This was most commonly done for ‘financial planning reasons’. The Victorian Government has now removed this exemption of stamp duty for the transfers of investment properties and/or commercial properties however the exemption will still apply for a property that is their main place of residence or a property that has been transferred due to relationship breakdowns.
If you have any enquiries in regards to how the May Budget 2017 will affect you, feel free to get in contact with one of our consultants at A One Accountants on 03 8609 1889. If you are also planning on purchasing an off the plan property and need assistance with obtaining a loan with the best interest rate, our specialist at A One Loans on 03 8899 7736 will also be able to assist you in that.