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3 min read

An Analysis of the Victorian State Budget

An Analysis of the Victorian State Budget

Let’s delve into Labor's 2023-24 State Budget and explore how its housing initiatives can impact you. From expanded eligibility for low-deposit home loan schemes to an increase in Commonwealth Rent Assistance, these measures aim to address challenges faced by renters, first-home buyers and property investors. We will also examine the impact of these initiatives, such as changes to the Home Guarantee incentives and Build-to-Rent (BTR) development incentives, on rental demand, investment returns and the overall housing market. Join us as we analyse the pros and cons while highlighting the opportunities these initiatives present for anyone interested in purchasing property.

land Tax Changes Explained

Starting from January 1, 2024, property owners in Victoria with investment properties or holiday homes will face additional taxes and charges. The tax-free threshold for general land taxes will decrease from $300,000 to $50,000 excluding owners' principal place of residence properties. Landholders with properties valued at $50,000 to $100,000 will be subject to a flat rate tax of $500 per year, properties valued at $100,000 to $300,000 will pay a yearly levy of $975 and properties above $300,000 will pay a yearly levy of $300,000 plus 0.1% of the land's value.

Impact on Property Owners

The government estimates that approximately 860,000 Victorians will be affected by these changes, including 380,000 individuals who will become first-time taxpayers. The COVID debt levy is set to last for a decade and aims to target property owners who have the capacity to pay, particularly those with multiple properties. 

Response from Property and Business Groups

While the government defends the tax changes as necessary, property and business groups have raised concerns. They argue that these measures disproportionately impact "mum-and-dad investors" and warn of potential consequences for the rental market, such as increased rents. Critics believe that landlords will pass on the additional costs to tenants, exacerbating the already existing housing affordability crisis.

Debating the Impact on the Rental Market

The question of whether the land tax increase will lead to higher rents remains contested. While some believe that landlords will inevitably raise rents to offset their expenses, others argue that rental prices are primarily determined by market dynamics and demand. Factors such as vacancy rates and the overall supply and demand play a significant role in rental pricing.

Government's Revenue Projections

The state government anticipates substantial revenue from the proposed changes, with the ‘COVID debt levy’ expecting to raise $8.6 billion over the next four years. The revenue projections indicate that the levy will remain in place until June 30, 2033, yet the Victorian government net debt projections are expected to grow over the next four years, from the current $135.4 billion to $171.4 billion in 2026-27. 

Looking Ahead

Victoria's new land tax changes reflect the government's efforts to address declining land transfer duty revenue and contribute to the state's financial recovery. While the impact on property owners and renters is a subject of debate, it is essential to monitor how these changes unfold and assess their long-term consequences on the housing market.

 

Victoria's budget announcements have brought significant changes to the state's land tax system, impacting property owners with multiple holdings. While the government aims to generate revenue and address its COVID-19 debt, concerns have been raised regarding the potential impact on rental prices and housing affordability. Striking a balance between financial recovery and fair taxation remains a challenge, and only time will tell how these measures shape the real estate landscape in Victoria.

 

*Please refer to the Federal and State Government websites for further information. Terms and Conditions apply to any other promotions that may be contained within this communication. Please enquire within and check with the vendor and agent for further terms and conditions. Only one promotion can be used per purchase and can not be used in conjunction with any other promotions. The information contained herein is given for general information purposes only and it is subject to change. Readers, viewers and consumers are advised to perform their own research and investigations and obtain their own financial, legal and other advice. The information and materials do not form any representation by any vendors or agents of any vendors and may include third-party opinions that do not represent the opinion of any vendor or agent. They do not form part of any contract of sale and they do not constitute legal, financial, real estate or other advice and must not be regarded or relied upon as such. No warranty is given either expressly or implied and the vendors or agents do not assume liability for negligence or otherwise with respect to the contents herein. Any plans are yet to have had their structural and services review so are subject to change prior to completion of construction. All plans, dimensions, areas and particulars herein whether by measurements or visual representation are approximate only, for general information only, and do not constitute any representation by the vendor or its agents or representatives. They do not form part of any contract of sale. Changes will undoubtedly be made during development and dimensions, fittings, finishes and specifications are therefore subject to change. Any furniture, goods and chattels depicted in this document are not included with any sale. Prospective purchasers or lessees are advised to not to rely on the information contained herein and to satisfy themselves as to the accuracy of all information given by making their own inspections, searches, inquiries and advises or as is otherwise necessary. The vendor or its agents or representatives will not be responsible for any error or misdescription which may appear. Further, the vendor or the developer or their agents or representatives do not represent, warrant and/or guarantee that the integrity of this communication has been maintained or that the communication is free of errors, virus, interception or interference. Usage of this or any other websites and materials and any associated website or material is subject to further terms and conditions.

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