New tax on vacant homes to ease housing affordability
Victorian Treasurer Tim Pallas proudly declared recently that he hopes the government’s latest tax doesn’t spin a single cent in revenue.
The new one per cent tax squared at owners of vacant homes is designed to get more houses on the market and improve affordability, rather than generate income.
It forms part of a bold raft of initiatives set to be introduced by the Victorian Government later this year.
Don’t bank on an empty home
At the current rate of housing vacancies, the new tax could reap $80 million over the next four years.
Properties left empty for more than six months of a calendar year will be hit with a one per cent charge, multiplied by the capital improved value of the property.
Premier Andrew Daniels said it was designed to inspire more owners to put their vacant properties on the market.
“This will send a really strong message to people that if you are effectively banking an empty property and denying that to the market and contributing to the lack of supply, then there’s something you can do about it,” he said.
“You can simply pay the tax or you might go see a real estate agent.”
Helping first home buyers
The new legislation comes as first home buyers find it harder to get their foot in the door of the property market.
As well as the vacant property tax, the government has abolished stamp duty for home purchases under $600,000, introduced a $50 million pilot program to co-purchase homes to assist buyers struggling to raise a deposit, and announced 17 new suburbs for Melbourne.
Treasurer Pallas said it was all in aid of improving housing affordability.
“We are making it easier for first home buyers to get their foot in the door,” he said.
“These initiatives are an important step towards ensuring today’s families and future generations will be able to afford somewhere to live.”
Exemptions to the rule
The way the vacant land tax works is that the property has to be ‘unreasonably’ vacant for the fee to be applied.
There are exemptions, including holiday homes, deceased estates and homes owned by Victorians who are temporarily overseas.
The tax will begin on 1 January 2018 and will target homes in the middle and inner suburbs of Melbourne.
Why this change is needed
At the end of last year, housing vacancies in Melbourne reached their lowest ebb since 2014.
The vacancy rate dipped down to just 1.5 per cent in August, down from 1.7 per cent 12-months earlier.
The sharp drop in the volume of rental properties available on the market comes as Melbourne becomes a more attractive place to live.
More Australians are migrating to the Victorian capital, while the drop in first home buyer numbers is also putting pressure on the amount of rentals available.
Premier Daniels said the new property laws would level the playing field.
“In the past, if you worked hard and saved enough, you could afford to buy your own home. Now, that’s getting harder and harder,” he said.
“These changes will help thousands of Victorians make the Great Australian Dream a reality.
“With negative gearing and capital gains tax concessions, the odds are already stacked against first home buyers. This will help level the playing field.”
22 May 2017 News