Stamp duty discounts, infrastructure spending and Build-to-Rent land tax policy announced

With build-to-rent land tax changes and stamp duty waivers for buyers of homes worth up to $1 million, and infrastructure spending, making up large parts of the Victorian budget, the Victorian State budget is most likely the most significant in its history.

The budget yesterday revealed the true impact on the State of the pandemic. With forecasting indicating a record deficit of $23.3 billion it showed, like the other States. that Victoria has a long way to go to get back to its pre-pandemic levels.

Victorian Treasurer Tim Pallas delivered the delayed budget as Victoria recorded no new cases of Covid on Tuesday, and zero active cases across the state. One day short of the 28 days zero transmission rates required for Queensland to allow Victorians to visit the state.

With Victoria's budget aiming to spend considerable amounts, approximately $49 billion, over the next four years, it is hoped that the anticipated goal of creating 400,000 jobs by 2025 is achievable. It is further believed the Victorian economy has lost 290,000 jobs from the state economy during the Pandemic

The significant economic recovery plan is essentially targeted towards infrastructure with the Government announcing $19.6 billion to be spent annually until 2024. Elements of the budget will include the $2.2 billion Suburban Rail Loop, and a $2billion advance towards the long-awaited Geelong Fast Rail. This contribution is allocated in conjunction with the federal government contribution.

One of the more pertinent elements of the budget, and of special significance to the property sector, will be tax relief on stamp duty on residential property transactions of up to $1 million. Luke Hamilton Davis, Principal of the boutique Advisory firm, Hamilton Davis Advisory said, "Action by State Governments to address Stamp Duty reform is long overdue in nearly all States. The announcement of reforms in the Victorian budget follows on from the ongoing consultation currently being worked through as part of NSW State budget."

"The next State to require serious reform, which unfortunately is usually the slowest and least prepared for reform appears to be Queensland." Davis said. "I genuinely believe that Stamp Duty reform, as part of a range of other tax reforms, could be a small silver lining to what a dreadful situation the Pandemic has been for so many people. I know the community have expectations of Government to constantly seek reform however while ever Governments are so overwhelmed with such significant levels of debt, as Queensland is, it is hard to imagine they can just back away from easy revenue."

A waiver of 50 per cent for new residential properties, and 25 per cent for existing residential properties, will be available in Victoria for purchases of up to $1 million on contracts entered into up to 30 June 2021. These change would deliver a saving of $27.5k saving for purchasers of a new property valued at $1million, while the saving is less significant but still relevant at $13.7k saving on an established dwelling.

The overall $5.3 billion building initiative, build to rent and land tax changes were included as cornerstone elements in the budget. It is the expectation that these initiatives will make more projects in the sector viable.

The 50 per cent land tax discount for eligible new developments until 2040 announced by the Government will make these developments also exempt from the Absentee Owner Surcharge over the same period.

It is the intention of the Government to increase supply of housing and options for renters by supporting the build-to-rent sector. Victoria has extended the $20,000 First Home Owner Grant to individuals buying or building a new home in regional Victoria, until the end of June 2021.

A new stamp duty concession of 50% on the purchase of commercial and industrial properties is intended to attract businesses to regional Victoria, it will be brought forward to January 2021.

Davis said " Again a stamp duty concession of 50% on the purchase of commercial and industrial properties demonstrates that the States are going to need to be competitive in their approach to attract investment and jobs, the Pandemic has thrown every State a challenge however in some respects it has thrown them opportunities, it will be interesting to see which States have the tenacity to execute on the opportunities."

ENDS