By Julie Barkla
March 28, 2017
The Victorian Government announced this month that it was abolishing stamp duty for first home buyers signing contracts from 1 July 2017. The fine print revealed that stamp duty for first home buyers wasn’t really being abolished, but that a purchase by a first home buyer would be exempt from stamp duty where the property was valued at less than $600,000. Stamp duty would also be reduced for purchased properties valued at between $600,000 and $750,000.
The fine print also disclosed that this exemption and concession will only be available to purchasers who are Australian citizens or permanent residents, and the property being acquired must be used as the purchaser’s principal place of residence for a continuous period of 12 months, commencing within 12 months of possession of the property. Both the purchaser and the purchaser’s partner must also satisfy the definition of “first home buyers” set out in the First Home Owner Grant Act 2000.
So stamp duty being collect on sales to first home buyers = less.
BUT, a second stamp duty announcement, seemingly not so well advertised, resulted in a stamp duty = more outcome. Whereas previously, concessions have been available for those purchasing property “off the plan”, from 1 July 2017 the Victorian Government’s largesse in this area is to be reined in.
Historically, a property buyer has only had to pay stamp duty on the value of the property they buy, as at the date of the contract of sale. So if someone buys “off the plan”, they are buying a property that has not yet been subdivided (so what they’ve bought hasn’t got its own title yet) and usually it isn’t built yet (the build often takes place after the date of the contract). So the value of the property as at the date of contract is much less that what it will be worth once it’s a brand new apartment or townhouse with its own title. The stamp duty on off the plan purchases is often considerably less than would have been payable had the contracts been entered into after the apartment had been built and the land subdivided. It would be safe to assume that this saving has provided one the main incentives for buying property off the plan.
From 1 July 2017, the off the plan stamp duty concession will only be available for those who qualify for the principal place of residence stamp duty concession or the first home buyer stamp duty exemption/concession. The concession will no longer be available for other purchases, such as residential investment properties and commercial properties. It seemingly won’t be available to foreign resident buyers, who may have greater difficulty fulfilling one of these requirements. The myriad ways in which foreign investors in Victorian property have been disincentivised in recent years is perhaps a topic for another day. But in any event, when it comes to stamp duty on off the plan sales, the Victorian Government, post 1 July 2017, will be collecting more.
For further information, please contact Julie Barkla.