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Victoria’s new stamp duty and land tax costs explained

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A new tax regime will have wide-ranging impacts across Melbourne's suburbs. Photo: Shutterstock

Victoria’s new stamp duty and land tax costs explained

As a property owner or potential new home buyer, it can be daunting understanding the nuances around the changes to stamp duty and land tax in Victoria.

As a property owner or potential new home buyer, it can be daunting understanding the nuances around the changes to stamp duty and land tax in Victoria.

You might be asking yourself, ‘what are the hidden costs in buying a house?’.

Whether you’re buying an investment property or your own home, you need to be well placed to navigate these changes. 

We’ve highlighted the facts that you need to know before you decide anything.

Stamp Duty: The upcoming shift

The State Revenue Office of Victoria calculates stamp duty on a sliding scale, starting at 1.4 per cent for properties valued at $25,000 and rising to 5.5 per cent for those valued at or above $960,000.

For example, on a property worth $2 million you would pay $110,000 in stamp duty.

How much is stamp duty in Victoria set to change?

Since July 1, there has been an increase in stamp duty for purchases over $2,000,000 (which will include the normal $110,000 payable up to $2,000,000 and then changing to 6.0 per cent over $2,000,000).

  • On a $2.2 million purchase the stamp duty will increase from $121,000 to $123,600.
  • On a $3.0 million purchase the stamp duty will increase from $165,000 to $175,000.

The government’s propositions have suggested that buyers in the $2m+ category are wealthy and can afford to pay additional taxes—sadly, for many of inner Melbourne suburbs, this isn’t necessarily the case.

If you’re wondering if it is a good time to buy property, our recommendation is, if you’re purchasing a home and can stretch that bit more to pay the stamp duty, you should.

The property market is forecasting increases that will exceed wage growth over the next few years. Property is a long term game, despite these increases to the cost of buying a property, in order to capitalise on current low interest rates, now’s the time to buy.

Land Tax: Preparing for the increase

We understand that the increase in land tax, which came into effect on July 1, may bring an element of apprehension for property investors or aspiring investors.

How much has land tax in Victoria changed?

  • Increases of 0.25 per cent apply for taxable land holdings from $1,800,000 to $3,000,000 and 0.3 per cent for taxable land holdings above $3,000,000.
  • If you have taxable land holdings of $3,000,000, the current rate of land tax is $24,975 and the new proposed amount would be $27,975 which is an increase of $3,000 per year. 

While some investors are selling properties, those that sell are likely to be left with a lower capital growth than those that pay the land tax and keep the property. 

The difference between the forecasted property growth and increase in land tax shows that investors are still better off having investment properties.

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