The issue of rising housing prices has been a growing concern for economists and policy makers, as first home buyers are increasingly being pushed out of the market.
This article will discuss planned changes to Stamp Duty exemptions and concessions and is the second segment in a three part series covering the Victorian government’s recently proposed measures to help first home buyers enter the market.
It is important to note that all initiatives are subject to approval by the Victorian Parliament, which will likely come in June 2017. In particular, stamp duty conces only contracts entered into after 1 July 2017 will be eligible for these concessions.
Firstly, what is stamp duty?
Stamp duty is a tax levied on legal documents which involve a transfer of ownership of property. It is generally paid by the buyer and is often roughly 5 or 6% of the dutiable value of the property, with dutiable value calculated as contract price less allowable deductions. Duty amount and rate varies across different states. In particular, stamp duty in Victoria can be calculated using this online tool. (Link: www.sro.vic.gov.au/calculators/land-transfer-calculator)
Changes to Stamp Duty for First Home Owners
Currently, First Home Owners who purchase a property are eligible for a 50% duty concession on homes with dutiable value of $600,000 or less. This is set to change to offer a full exemption from stamp duty for properties with dutiable value $600,000 or less, and concessions calculated on a sliding scale (Link: www.sro.vic.gov.au/node/5814#q2) for properties with dutiable value $600,001 to $750,000. These benefits are available to all purchasers who satisfy the First Home Owner Grant eligibility criteria. (Link: www.sro.vic.gov.au/first-home-owner#fhog)
Changes to Stamp Duty for Off-the-plan (OTP) purchases
Existing stamp duty concessions are available for buyers who purchase a home Off-the-plan (OTP). OTP refers to the purchase of property where the contract to buy is signed before the property has been built, as is often the case with apartments. For these purchases, stamp duty is only applied to the OTP dutiable value, which is calculated as the purchase price minus construction and refurbishment costs.
Proposed changes to these concessions on off-the-plan purchases restrict the accessibility of these concessions to buyers who intend to occupy the property as a home. This means that holiday homes, investments and commercial properties will no longer be eligible for these concessions under the proposed new ruling. Furthermore, properties with dutiable value over a certain threshold (Link: http://www.sro.vic.gov.au/node/5813#q3) will not be eligible.
What does this mean?
Expect a drop in apartment commencement rates as the attraction of purchasing an apartment off-the-plan purely as an investment diminishes. These measures will contribute to tip the scales in favour of owner buyers, as many of the key benefits are being targeted towards this struggling segment.
