Housing minister blasts Victorian windfall gains tax

In late November, the Victorian government passed a new windfall gains tax, which will impact landholders that experience a property value uplift of $100,000 or greater due to rezoning decisions.

The tax, which comes into effect from 1 July 2023, will be calculated based on valuations pre-rezoning and the post-rezoning, with the difference between the two representing the value uplift of the land.

Property owners with a value uplift between $100,000 to $499,999 will see the remainder of their value increase above $100,000 taxed at 62.5 per cent, while those who gain $500,000 or more will see their uplift taxed at 50 per cent.

But Michael Sukkar has blasted the measure, saying it will “hit families, cost jobs in the construction sector and put a handbrake on Victoria’s economic recovery from the pandemic”, as well as hurt first home buyers and regional and rural Victorians.

“This is all about Victorian Labor blowing their budget through poor financial management. Instead of taking the hard decisions and prudently managing their budget, Labor’s solution is to simply increase the tax burden on all Victorians and make it more expensive to buy a home,” Mr Sukkar claimed.

“If Federal Labor were serious about helping reduce the cost of living, creating more jobs and increasing housing supply, they should immediately call on their Labor state counterparts to reverse taxes that will hurt Victorian families.”

The Urban Development Institute of Australia (UDIA) has estimated that the new tax in combination with existing taxes, fees and charges will comprise up to 42 per cent of the price of a new Melbourne home.

Housing Industry Association (HIA) executive director Fiona Nield commented the price of a block of land in regional areas could rise by tens of thousands of dollars as a result.

“HIA modelling shows that the price of a housing lot in the Geelong growth area is set to increase by as much as $53,000 under the windfall gains tax,” Ms Nield said.

“This is just one part of regional Victoria – the impact of this tax on regional Victorians cannot be underestimated.”

Further, the Victorian Farmers Federation (VFF) has also opposed the new tax.

Meanwhile, the Victorian government has also introduced a build-to-rent scheme, which will provide incentives for investors to build rental properties.

Eligible developments completed and operational between 1 January 2021 and 31 December 2031 will receive a 50 per cent land tax discount and full exemption from the absentee owner surcharge (AOS) for up to 30 years.

The AOS applies a 2 per cent surcharge to land tax for Victorian land owned by an absentee owner, which can be an individual who is not an Australian citizen or permanent resident, does not ordinarily reside in Australia or was absent from the country for certain periods of time.

An absentee owner can also be defined as an absentee corporation (incorporated outside of Australia or in which an absentee person has a controlling interest) or an absentee trust, a trust which has at least one beneficiary who is an absentee person.

But Mr Sukkar has called the build-to-rent measure a tax break for “foreign luxury apartment investors”.

[Related: FHB affordability dire in Tasmania]