Stamp Duty Changes in Melbourne and Victoria
Find out how from 1 July 2017, the availability of the stamp duty concession for off-the-plan purchases in Victoria will be restricted and how this will affect you the purchasers.
In Brief, what you need to know:
- From 1 July 2017, purchasers of off-the-plan commercial properties or residential investment properties (not yet constructed) will be liable to pay stamp duty on the purchase price or the market value of the property (whichever is greater).
- First home buyers of residential properties (not yet constructed) may be eligible for the off-the-plan duty concession.
- Purchasers of residential properties intended to be the principal place of residence (not yet constructed) may be eligible for the off-the-plan duty concession.
What does it mean for investors?
You now have until end of June this year 2017 to commit to an investment property by signing off on the contracts prior to 1 July 2017 to maximise current Stamp Duty Savings … and you will know how much this savings is worth to you in your own pocket rather than in the Governments!
Existing Off-the-Plan Duty Concession:
Until now, Victorian purchasers of real estate that was not yet constructed were only required to pay stamp duty on the value of the land and any improvements that were already constructed on the land, as at the date of the contract. The value of any construction or refurbishment that was carried out on or after the contract date and before settlement was disregarded for the purposes of calculating the purchaser’s stamp duty liability.
Under the proposed new regime, which is subject to the State Taxation Acts Amendment Bill 2017 being passed by Parliament, purchasers of real estate that is not yet constructed will not be entitled to a stamp duty concession unless they are:
- entitled to the first home buyer duty exemption/concession; or
- entitled to the principal place of residence duty concession.
That is, purchasers of commercial properties or residential investment properties who enter into an off-the-plan contract of sale on or after 1 July 2017 will be liable to pay duty on the purchase price or the market value of the property (whichever is greater).
Purchasers of off-the-plan commercial properties or residential investment properties who entered into a contract of sale before 1 July 2017 will still be entitled to a stamp duty concession, even if their purchase settles on or after 1 July 2017.
What does it mean for owner-occupiers?
First Home Buyers:
From 1 July 2017, first home buyers of residential properties that are not yet constructed where the land and any improvements that have already been constructed as at the contract date have a value up to $750,000 will be eligible for the off-the-plan duty concession.
Principal Place of Residence Exemption/Concession:
From 1 July 2017, purchasers of residential properties that are not yet constructed where the land and any improvements that have already been constructed as at the contract date have a value of up to $550,000 will be eligible for the off-the-plan duty concession if they intend to use the property as their principal place of residence.
Why the changes?
The changes are estimated to generate an additional $841 million in stamp duty revenue, and the Government intends to use this revenue to offer new stamp duty exemptions and concessions to eligible first home buyers.
Our point of View
How can a State Government deliberately grow a population (planned from current 4.5m to 10m residents requiring hundreds of thousands of new dwellings between now and then) and know that a large percentage of new immigrants to Australia cannot land here and simply buy a dwelling to live in
Meaning a vast majority will be one of your tenants!
Keeping this in mind, any added costs you experience on entering into your investment property will simply be passed onto your tenant to help you fund your investment. Correct?
If this is so the current Government do not give a ‘rats’ *** about the population they are wanting to bring in they are focused short term on their own pockets
The same would have applied if they got their wish and took away negative gearing. It is INFLATIONARY which ever way you slice and dice it and only the have not’s who do not invest in property (and will never be able to retire) are the ones giving the current government a thumbs up. Typical case of tall poppy syndrome!
Not being in our control, if you are considering investing there is now another Major Reason why not to wait. On top of current rising values in the Melbourne market. Waiting is only going to negatively affect your end financial result and if you take the power of compounding investment returns into effect this is going to be one large amount over the period of your investment you would have to agree!
Our advice based on pure logic :
- As always, today is the right time to invest. Ignore the media and commit to your own goals
- Most people will never retire or retire in a lifestyle they want to. Those with investment properties have improved their own odds of doing so successfully
- Work out what is your own Reasons Why you would want to invest, click here
- Why wait and guarantee to pay more, extra stamp duties will not lower the cost of the property market
- Strongly advise to choose the right investment property by establishing early how the investment fits in with your larger financial plans. Meaning match the investment to your own overarching financial goals
- Having said this you may want to consider investing
- In your own title
- In a Self Managed Super Fund
- Your current industry super fund is growing at a dismal 5% – 7% over 10 to 15 years dramatically lowering your end financial gain
- It makes sense to secure an investment property in super where achieving 10% pa compounded over the life of your investment thus providing you with a potential significantly higher retirement value as 10% compounded over the life of your investment compared to 5-7% compounded over this same period
- Another major advantage is investing only say 20% of your funds into your chosen property but having 100% of the value of the property working / growing for you!
- Read more here and give yourself choice!
We are not financial planners and are not offering financial planning advice merely explaining logic, statistics and time in the market