In pre-budget announcements, Victoria’s Treasurer, Tim Pallas, confirmed plans to have the wealthiest homeowners and developers pay more taxes. The government estimates that these changes would raise $2.4 billion in revenues over the next four years.
The proposals include a new windfall gains tax on developers whose projects are on industrial lands that have undergone re-zoning and experience a gain of $500,000. Under this arrangement, developers may be hit with a tax of as much as 50% on such properties from 1st July 2022. The government estimates that this could bring in as much as $40 million a year in tax revenues.
Land tax rates are also intended to go up for wealthy property owners. Those with taxable landholdings estimated to be worth over $1.8 million will suffer an increase of 0.25%, while those with holdings of over $3 million will face a 0.30% increase. This will apply as from 1st January 2022.
Stamp duty on property transactions worth over $2 million will also increase to $110,000 plus 6.5% tax of the dutiable value in excess of $2 million. The government expects this to boost revenues by about $761m over the next four years from July 2021, despite affecting less than 4% of transactions.
Pallas said that the tax system was fair and progressive and would see everyone contribute fairly towards the state’s economic recovery. He added that the changes would see those that were making huge profits return a reasonable portion to the community. He claimed the increases were modest when compared to the spectacular returns made over the last decade.
The plans are however not being warmly received by everyone. Property industry leaders have criticised the hikes, calling them “short-term gain for long-term pain”. They also claim they would worsen the current housing crisis. Property Council of Victoria executive director, Danni Hunter, said the taxes could make creating new housing less appealing. She added that they would make Victoria lose its competitive edge to other Australian cities that were working towards attracting new investment.
HIA executive director, Fiona Nield, agreed with this view, calling the new taxes short-sighted. She stated that the cost of the new taxes would be passed on in the form of rising land prices that would make it difficult for people to sell their properties and allow for the development of new homes. She claimed it would directly impact the affordability of new housing. She was particularly concerned with the new windfall gain tax that she felt was taking a disproportionate share of property value from landowners already contributing to the growth in housing.