on Stamp Duty Changes in Victoria
Australia has been dealing with the falling property market for the past few years now. While it’s been reported that the prices are soon to stabilize, the effect of this has really left such a lasting impact on the major cities. Particularly, Victoria has made an effort to fill the $5.2 billion shortfalls caused by this. Because of the effects of the falling property market, stamp duty receipts declined and the Victorian government’s solution was to re-write tax on development agreements. This re-write would actually expand the group that can be taxed.
But first off, what is stamp duty?
Stamp Duty is a tax imposed on documents. This includes marriage licenses, receipts, and transactions on land. Physical stamps are attached on a document that signifies that it has been paid, even before the document is effective legally. Nowadays, an actual stamp is no longer required. In Australia, the federal government does not actually impose stamp duty but states levy on certain documents and transactions.
So what will happen with the new changes? Let’s find out.
The Victorian government just recently waived new taxes on property owners, buyers of luxury cars, and gold-miners. This change came the day after the state budget announced that there will be changes on the rules pertaining the economic entitlement. Last May 27th, the Victorian government released the budget for 2019-2020 and revealed implications for corporate reforms in the city starting from July 1 this year. Highlighted in the budget are the following:
- Victorian resident surcharge for stamp duty and land tax
- No more exemptions for gold from the Victorian royalty regime
A bill was released stating that it will no longer developers not pay stamp duty when they enter into an agreement with a landowner to develop a site even if the land is not yet purchased. This was intended to address the judgment made in 2016 by the Supreme Court to impose stamp duty on economic entitlements of landowners. These changes made will now subject developers to pay 5.5 percent stamp duty on the entire value of the land regardless of the economic entitlement owned by a third party.
Unfortunately, experts believe that higher stamp duty could have a negative effect on the construction pipeline. In March, the recorded numbers of dwelling approvals fell to 4.4 percent which is considered weak. Because of the stamp duty rates, it could impact taxpayers as well as business—most especially in the property industry. The main thing about the change is that any interest received under economic entitlement, 5o% threshold is to be removed. Economic entitlement, meaning, the absolute right to an economic benefit by law after meeting the requirements. The new rules state that economic entitlements also work as landholdings, “landholder duty is triggered if there is a relevant change in the ownership of a unit trust or company owning these rights, 20 percent for unit trusts and 50 percent for companies,” according to reports.
Experts also add that it’s important for developers to immediately finalize all agreements because of the effects of this new stamp duty.