Victorian stamp duty abolished, while NSW government reverses earlier reforms

The Victorian Government has used its annual budget to replace stamp duty for commercial and industrial properties with an annual property tax, while leaving the cash cow that is residential stamp duty untouched.

Owners of holiday homes in Victoria were also in the crosshairs of the Daniel Andrews government.

As part of a Covid debt levy, around 860,000 Victorians will be affected by a decision to charge those with second homes or investment properties a new flat rate of up to $975, plus an additional levy of on the value of their land from the start of 2024.

The measure will be in place for ten years. The tax-free threshold for general land tax rates for properties that are not a principal place of residence will decrease from $300,000 to $50,000.

Across the northern border, meanwhile, the New South Wales Government has retracted an annual land tax that only five months ago had been presented as an alternative to residential stamp duty.

NSW Premier Chris Minns has eradicated the First Home Buyer Choice Scheme launched by the previous Liberal government in January, effective from 1 July.

The new legislation will instead raise the threshold for stamp duty exemptions that are already in place for first home buyers from $650,000 to $800,000. Stamp duty concessions will now be applicable for $800,000 to $1 million property purchases.

Victorian Treasurer Tim Pallas said the changes to Victoria’s commercial stamp duty regime would remove barriers to larger investments and accelerate business growth.

From the middle of 2024, commercial and industrial properties will transition to the new system as they are sold, with the annual property tax to be payable from 10 years after the transaction.

To smooth the transition, the first purchaser of a commercial or industrial property after 1 July 2024 will be able to choose to either pay the property’s final stamp duty liability as an upfront lump sum, or transition to an annual payment immediately by opting to pay fixed instalments over 10 years equal to stamp duty and interest with a government-facilitated transition loan.

“Business and industry have told us they want this reform and we’ve listened,” Mr Pallas said ahead of the release of the state budget on Tuesday (23 May).

Stamp duty reform just part of bigger picture

The move was welcomed by representative industry bodies, but others bemoaned the lack of budgetary measures addressing affordable and social housing, public housing waitlists and homelessness.

Victorian Chamber of Commerce and Industry CEO Paul Guerra said the Victorian Chamber had been working with the State Government on this “landmark and generational productivity reform that businesses across Victoria will welcome.”  

“This is exactly the type of progressive tax reform required to free up stamp duty charges, which will accelerate building upgrades, stimulate investment in commercial property and free up more capital,” he said.

Real Estate Institute of Victoria CEO, Quentin Kilian, said the Victorian Government’s abolishment of stamp duty for commercial and industrial property sales is an encouraging sign for the sector, and Victorian businesses more broadly.

“We appreciate the Government for opening a door to important tax reform – it shows a listening ear to the sector’s call for change.

“Stamp duty is a significant barrier to property investment and for as long as it remains in the residential property sector, millions of aspiring homeowners and thousands of everyday mum and dad investors are impeded, which creates a significant negative ripple effect on the rest of the market,” he said.

The Victorian Budget also delivered $134 million to provide access to housing and homelessness support. 

It includes $67.6 million for Housing First responses and supports, which will deliver much needed permanent supportive housing responses to people formerly sleeping rough.

The budget also continues a range of targeted housing and support, including a range of services for women and young people experiencing homelessness as well as much needed additional health and drug and alcohol supports to people in crisis accommodation.

Council to Homeless Persons CEO, Deborah Di Natale, welcomed the funding for support services being maintained but said little was being done to create new social housing properties and address the rental crisis.

The State Government should commit to building at least 6,000 social housing properties each year for a decade.

“The Big Housing Build is proof this government acknowledges the massive need for more social housing but with 57,000 households on the waiting list, that initiative simply cannot be a one off. 

“As a state we’re investing in over 55,000 nights of short-term accommodation each month, which is nowhere near enough to meet demand and does nothing to end someone’s homelessness.”