The Victorian Treasurer has announced a 50% waiver of stamp duty for acquisitions of new residential properties, and a 25% waiver for existing residential properties with a dutiable value of up to $1 million, which will apply to contracts entered into between 25 November 2020 and 30 June 2021.
What are the rules about?
According to the Budget papers released today, land transfer duty revenue is expected to fall steeply by 25.9% in 2020-21 (compared to 2019-20), reflecting the fall in transaction volumes due to the public health restrictions on property inspections and auctions and weaker property prices since the onset of the coronavirus pandemic.
As part of the Government’s response to the pandemic and its Big Housing Build package, the Treasurer has announced that stamp duty will be significantly reduced by up to 50% on purchases of residential property in Victoria with a dutiable value of up to $1 million. The waiver is 50% for new residential properties and 25% for existing residential properties. The waiver will apply to the stamp duty otherwise payable (excluding any Foreign Purchaser Additional Duty).
The waiver applies in addition to the existing stamp duty concessions. For example, subject to the relevant eligibility criteria being met, a first home buyer purchasing a new home worth $700,000 would be eligible for both the first home buyer stamp duty concession and the new 50% waiver, resulting in a saving of more than $24,000.
Who do the changes apply to?
At this stage, details on the eligibility criteria have not been released. Given that there is already an existing stamp duty exemption/concession for first home buyers in respect of properties worth up to $750,000, it appears that the new waiver may not be limited to first home buyers. It remains to be seen whether it will be available to investors as well as home buyers.
What is clear is that the measure is targeted towards local purchasers, given that the waiver does not apply to any Foreign Purchaser Additional Duty (currently an extra 8% of stamp duty) payable by foreign purchasers, including natural persons who are not Australian citizens or permanent residents.
We expect that the details of the measures (including the eligibility criteria) will be in the State Taxation Acts Amendment Bill 2020, which should be made public tomorrow.
When do the changes apply from?
This measure will apply to contracts entered into from Wednesday, 25 November 2020 until 30 June 2021.
The Budget papers also refer to the previously announced 50% stamp duty concession for commercial and industrial properties being brought forward to 1 January 2021 (which we reported on here) and various bushfire tax relief measures (which we also previously reported on here).
Our initial views
Whilst the measures announced today by the Victorian Treasurer are not as significant as the recent NSW stamp duty and land tax reform proposal announcement and there is no relaxation of the off-the-plan stamp duty concession rules, the measures are welcome, especially for residential property developers, home buyers and investors. We expect that these measures should, in conjunction with HomeBuilder and the Victorian Homebuyer Fund, lower the barriers to entry for many purchasers and provide a welcome boost for the residential development sector by increasing (temporarily at least) the number of transactions involving newly-built and off-the-plan properties.
What are the next steps?
Contact your Pitcher Partners representative if you have any queries concerning the Victorian Budget 2020-21 measures, and how these apply to you as a home buyer and property investor.