Property groups are slamming the Victorian government’s plans to introduce another property tax.
The state government is set to push for the legislation of the proposed windfall gains tax, which is expected to pass through the Legislative Council.
Announced as part of the Victorian Budget 2021/22, the new windfall gains tax will see 50% of any uplift in land price by more than $500,000 as a result of rezoning going straight into the government’s coffers.
Residential land that includes a home, be it a holiday home or an investment property, will be exempted from the tax.
Furthermore, that new tax will not apply to any other increases in value, such as appreciation in property value over time.
However, Housing Industry Association (HIA) executive director for Victoria Fiona Nield said the timing for the proposed tax “could not be worse”.
“It will come as homes built using the recent Federal Government’s HomeBuilder grant will have been completed, with the risk that new home builds will most likely be in decline threatening jobs in the years ahead,” she said.
The tax, Ms Nield said, would mean that future homebuyers will be faced with rising land costs.
Private landowners will also be affected, as this tax will be a major disincentive for them to sell or develop their land for housing.
Ms Nield said the price of a housing lot in the Geelong growth area could potentially rise by as much as $53,000 under the tax.
“We know that over 90% of renters aspire to home ownership but less than half believe they will achieve this goal,” she said.
“There is no way that you can improve housing affordability by adding new taxes, fees and charges.”
“Bringing new land to market in Victoria takes up to a decade, meaning landowners already manage the risk, cost and changing legal arrangements that may affect a project,” she said.
Ms Nield said developers who recently purchased land for housing development could potentially be unable to proceed with their projects on time given the setback.
“Certainty is key — landowners are used to paying federal taxes on property sales, but this windfall gains tax will bring unnecessary complexity to Victorian property transactions and slow down housing supply.”
Regional markets to bear the brunt
The Property Council executive director for Victoria Danni Hunter said Victoria has just emerged from a long lockdown only to be slapped with another property tax.
“This is the wrong tax at the wrong time and will hit Victorian families, jobs and investors when we can least afford it,” she said.
Ms Hunter said the property, construction, housing, and development industries already contribute 59% of the state’s taxation revenue and this new tax will only add burden to the community.
“It will also have a significant impact on regional Victoria. We are calling on MPs from all sides to do the right thing and oppose the new tax so we can get on with our important economic recovery and get Victoria moving again,” she said.
UDIA Victorian chief executive Matthew Kandelaars shared the same sentiment about the tax affecting regional markets, adding that the tax will equate to at least $250,000 per hectare in regional Victoria, compared to just over $100,000 per hectare in Melbourne’s growth corridors.
“There’s no justification to hit regional Victoria with a tax more than double that charged in Melbourne. A vote for this tax is a vote to leave regional Victoria behind,” he said.
“It’s the value generated from a rezoning that builds homes, creates and sustains jobs and builds communities. If development stops then housing supply dries up and prices will skyrocket.”
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Photo by Markus Spiske on Unsplash
