By Tom Cantwell, Partner, Anthony Brearley, Partner, and James Price, Partner
The Victorian State Government recently announced that from 1 July 2017, the off-the plan stamp duty concession will only be available to purchasers who intend to live in the property being purchased off-the-plan.
This is one of many changes recently implemented by the Victorian State Government that directly affect foreign and local investors.
The practical effect is that, from 1 July 2017, the off-the-plan concession will not be available for:
Although the announcements imply that the concession will be available for any purchaser intending to live in the property (regardless of the dutiable value), our understanding is that
the off-the-plan concession will be limited to individuals who qualify for the principal place of residence stamp duty concession or the first home buyer stamp duty concession.
From 1 July 2017, in order to qualify for a principal place of residence or first home buyer stamp duty concession, the dutiable value of the property cannot exceed:
For an off-the-plan property, the dutiable value is the improved value of the land following the application of the land and building concession.
In effect, this means the dutiable value must be less than $550,000.00, unless the first home owner concession also applies.
The potential implication is that if a property is purchased off-the-plan, but has a dutiable value in excess of these caps, the off-the-plan concession is not available.
Example 1: a couple decides to downsize and buy a new apartment in an apartment block with a purchase price of $1,000,000.00, where construction has not commenced. The value of the land plus improvements at the contract date (the dutiable amount) is $250,000.00, calculated in accordance with form 4A on the State Revenue Office website. This is below the principal place of residence threshold of $550,000.00, meaning the purchaser is eligible for the off the plan stamp duty concession.
Example 2: a couple decides to upsize and buy a new penthouse apartment in an apartment block with a purchase price of $2,500,000.00, where construction has not commenced. The value of the land plus improvements at the contract date (the dutiable amount) is $625,000.00, calculated in accordance with form 4A on the State Revenue Office website. This exceeds the principal place of residence threshold of $550,000.00. The purchasers are not eligible for the first home buyer stamp duty concession as this is not their first property purchase. As a result, the purchasers are not eligible for the off-the-plan stamp duty concession.
This treatment will hopefully be confirmed upon release of the amending bill by the Victorian State Government and prior to the 1 July 2017 implementation date.
The raft of housing affordability policy initiatives appear to be directly aimed at foreign (and to a degree, local) investors and purchasers.
Currently, foreign investors and purchasers are required to pay:
From 1 July 2017, foreign investors and purchasers are required to pay:
The new vacant property tax can potentially affect all property owners (both foreign and local), where an exception does not apply.
Regardless, it is clear that the new initiatives continue to place foreign investors and purchasers at a distinct disadvantage.
The off-the-plan concession is a draw card for investment in the Victorian market. The Property Council of Australia has identified that investors currently pre-purchase more than 50% of off-the-plan properties.
Abolition of stamp duty concessions for investors of new property and the introduction of the vacant property tax may lead investors to switch to other asset classes, rather than property. This could potentially have an enormous impact on Victorian’s property industry, particularly the financial viability of future developments and projects.
We will provide a further update upon release of the draft bill by the Victorian State Government.
For more information, refer to http://www.vic.gov.au/affordablehousing/buying-a-house-in-victoria.html, where a number of fact sheets have been posted by the Victorian State Government.
For further information, please do not hesitate to contact:
Tom Cantwell | Partner
T: +61 3 9605 0958
Anthony Brearley | Partner
T: +61 3 9605 0810
James Price | Partner
T: +61 3 9305 0824