From late 2017/early 2018, the state government of Victoria introduced new land taxes that apply to certain suburbs in and around Melbourne.
There are two new taxes you need to be mindful of, particularly if you are (what is now called) ‘land banking’: that is, you are purchasing vacant land (or even homes that are uninhabitable which now can constitute being categorised as ‘vacant land’) and ‘sitting on it’ and/or looking to to later sell to developers (or anyone else) at a premium.
The reason the new land taxes were introduced were to disincentivise people buying up land and not developing it and to encourage property owners to ensure their homes are inhabited to address housing supply issues in Victoria.
So just what are the taxes and how do they affect you?
Vacant residential land tax
The vacant residential land tax applies to homes in specified suburbs in Melbourne that were vacant for more than six months throughout the calendar year (1 Jan – 31 Dec). The state government is trying to ensure available properties across the city are inhabited to help combat the housing supply issues we currently face in Victoria.
Vacant homes in the following municipalities may be affected:
- Glen Eira
- Hobsons Bay
- Moonee Valley
- Port Phillip
This is in addition to Land Tax that may also apply.
Find out if you have to pay the vacant residential land tax here.
Absentee owner surcharge
If you own land or property in Australia but are currently living overseas and have done for more than six months in the calendar year (1 Jan – 31 Dec), then you may be liable for the absentee owner surcharge.
The surcharge payable is 1.5 per cent.
For any overseas investors looking to hold an investment property with land valued at over $250,000 in Australia, be mindful that this surcharge may be applicable on your land tax payable also.
Find out if you have to pay the absentee owner surcharge here.
The key takeaway here is that any time you are looking to purchase property to invest, it’s important to chat to your solicitor or conveyancer upfront to determine what taxes you may be liable for that can impact upon your expenses and overall investment profitability.
Thinking about investing in property soon? Chat with an Entourage Conveyancer to understand what fees and taxes you need to be across.