Understanding Victoria's New Taxes & Housing Initiatives

Victoria is making significant changes to its taxation policies and housing initiatives, which have sparked both excitement and concern among residents. In this blog, we will delve into the details of three major developments: the new land tax, a tax on short-term rental properties, and a broader plan to address housing challenges.

New Land Tax:

Starting from January 1, 2024, Victorians who own second homes or investment properties will face a new tax. This tax is designed to help the government pay off debt incurred during the COVID-19 pandemic. Here's how it works:

• Landowners with properties valued between $50,000 and $100,000 will pay a fixed charge of $500.
• For properties valued between $100,000 and $300,000, the fixed charge increases to $975.
• If your property's value exceeds $300,000, you'll pay $975 plus an additional 0.1% of the value above $300,000.
• Importantly, your primary residence is exempt from this tax.

Approximately 860,000 Victorians will be affected by this new tax, with around 380,000 of them being first-time taxpayers. The government aims to generate $4.7 billion in revenue from this land tax in the current budget year. While the government argues that this tax targets those who can afford it and won't significantly impact rents, property groups are concerned it could lead to higher rents and make property investment less accessible.

Tax on Short-Term Rental Properties: 

In a bid to unlock housing supply, Victoria is introducing a 7.5% tax on short-term rental properties, such as those listed on Airbnb and Stayz. This marks the first such tax in the country. The government's rationale is that these properties cannot be utilised for long-term housing, which is in high demand due to a rental crisis.

Revenue from this tax will be allocated to Homes Victoria to build and maintain social and affordable housing, with a focus on regional areas. Critics argue that this tax could add $100 to the cost of a weekend getaway in Victoria.

Housing Initiatives: 

Victoria's government has set an ambitious goal of constructing 800,000 new homes over the next decade to accommodate the state's growing population. To achieve this, they plan to:

• Expedite the planning process.
• Facilitate the construction of additional units on residential properties.
• Streamline approvals for medium to high-density residential developments.
• Implement planning controls in various activity centres.

The response to these housing initiatives has been mixed, with some property groups applauding the plan's efforts to address housing challenges, while others criticise its social housing provisions as insufficient.

Victoria is embarking on a series of significant changes in taxation and housing policies. While these changes aim to boost the housing supply and alleviate financial burdens, concerns persist regarding their potential impact on renters and property investors. The government's commitment to balancing these interests will play a pivotal role in shaping Victoria's housing landscape in the coming years.

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