Australians in one state will face lower property land taxes from next year. The change has been confirmed by the Victorian leader with Premier Ben Carroll saying the Labor government will roll back the higher land tax introduced by his predecessor. The highly speculated move has been dubbed a “tax retreat” and met with scorn
Australians in one state will face lower property land taxes from next year. The change has been confirmed by the Victorian leader with Premier Ben Carroll saying the Labor government will roll back the higher land tax introduced by his predecessor.
The highly speculated move has been dubbed a “tax retreat” and met with scorn by critics of stamp duty and those who advocate for the benefits of land tax, however. “It’s a bit of a populist move and it’s misguided,” Prosper Australia Executive Director Rayna Fahey told Yahoo Finance.
“We know that land taxes are the most fair and efficient taxes that we have available to us. And every single inquiry, review, investigation that any government has had over the last 30 years into housing and tax has urged for a transition towards land tax, not away.”
RELATED
The land tax threshold was significantly lowered in 2023 – cutting the point at which the tax kicked in from $300,000 to $50,000 – by former premier Dan Andrews to raise revenue after a pandemic spending splurge by the state government.
The tax applies to properties which are not the primary residence of the owner, hitting landlords and those with holiday homes as well as commercial land, with the more punitive tax regime originally intended to be in place until 2033.
Melbourne buyers agent and investor Ben Carrington told Yahoo Finance the measure had helped “destroy” capital growth in the state’s housing market, which has seen prices stagnate compared to other parts of the country.
“It really affected both ends of the market,” he said. “But the fundamentals of [investing in] Melbourne and Victoria are extremely strong.”
And he’s been putting money where his mouth is, with an expectation that a watering down of land tax could be an added tailwind to the city’s property market.
Carrington has personally bought nine properties for his own portfolio in Melbourne since the federal budget soured the national market. The properties – one house, one townhouse, three villas and four units – were all priced under $500,000 and is exactly the segment of the market which would see a direct benefit from the land tax threshold being wound back to a higher level.
“I bought them from $257,000, up to about $485,000 was the most expensive one,” he said. “So I try to stick within that price point.”
He sold properties in Queensland to fund the personal purchases, which is a market he thinks has topped out, and wants to buy about nine more similar properties in Melbourne for a total of around 18.
While he’s focused on achieving good rental yield for himself and his clients, he thinks the changes to land tax for lower-end properties could be “the thing that really sets the market going”.
“The land tax is a funny one, because the cost isn’t that high, but it’s the sentiment and thinking around it – a lot of people just didn’t want to invest in Victoria because they felt the government just changed the rules on them, they thought it wasn’t pro-investor and they’d rather put their money elsewhere,” he said.
“We really believe Melbourne has bottomed out.”
How will the land tax change?
The levy operates on a sliding scale and is based on a site’s unimproved land value, not the value of the dwelling.
If Labor wins, the tax-free threshold would be raised by $25,000 a year before returning to the pre-Andrews figure of $300,000 in 2033.
According to the government, the changes would apply to more than 250,000 property owners, saving them around $1,000 a year and result in about a $230 million hit to the state budget over five years.
The Liberal opposition announced a similar policy in May when it vowed to raise the threshold by $50,000 a year to reach $300,000 a couple years earlier.
Newly appointed Victorian Premier Ben Carroll has confirmed he will wind back the land tax levy. ·Asanka Ratnayake via Getty Images
New data released by the Labor government on Monday revealed that 90 per cent of Victorians who own land valued between $50,000 – $300,000 have just one property, while only two per cent pay land tax on three or more properties in that range.
It also noted that taxpayers in the land tax brackets set to be rolled back are mostly in outer-suburban and regional areas.
“Thousands are in their 40s or younger and the median age is around 53 – ages where most people are still paying mortgages,” state treasurer Colin Brooks said.
“Working people who are paying off two mortgages are feeling the pressure as much as anyone right now.”
Land tax more efficient, reduces speculation and hoarding
Melbourne-based think tank Prosper Australia has long championed land tax as a much more efficient way to regulate the housing market and capture the “community created wealth” of rising land prices.
“That is something we should be taxing, because if you don’t tax those things, you’re creating a incentive to speculate and hoard,” Fahey told Yahoo Finance.
“And we want to free up our land to be working as efficiently as possible in our economy. And land taxes are the number one tool we’ve got to do that.”
Fahey pointed to the fact Victoria has the second highest rates of home sales going to first home buyers in the country. In the March quarter first home buyers accounted for 39.1 per cent of new owner-occupier lending in the state, the second-highest share of any state or territory behind only the ACT, which is on a slow transition away from stamp duty to an annual land tax.
She joked that the Labor government perhaps “accidentally did something really good” and called for policymakers to end a dependency on stamp duty, which dramatically increases the cost of moving, in favour of higher land taxes.
“I would love to see the government say; ‘Hey, you know, we introduced this thing and it has worked really well.
“What we should be doing is getting rid of stamp duty, and we want to transition in that direction instead’.”
While the new Labor leader characterised it as a way to deliver cost of living relief, Fahey described it not as tax reform, but “a tax retreat”.
“It is a betrayal of working Victorians to make it cheaper to hold valuable land while leaving taxes on work, enterprise and moving house in place.”
Reportage Media Is a Global News Platform Covering the Latest Developments and Breaking Stories from Around The World, Including World News, Business, Finance, Technology, Health, Politics, Science, Entertainment, Sports, and More.
