Tax will drive landowners away from Victoria, peak body says
Victoria Treasurer Tim Pallas has drawn ire from the property industry by announcing an expansion of taxes on vacant residential land during.
Pallas revealed his plans to introduce legislation to parliament last week, which would extend the vacant residential land tax to cover the entire state starting from Jan. 1, 2025, according to a report by The Guardian.
Currently, the tax only applies to empty residential properties in the inner and middle suburbs of Melbourne that have been vacant for six months. It is charged at 1% of the total property value, including the buildings on the site, The Guardian reported. Additionally, another tax will be introduced on vacant residential land that has remained unimproved for five years or more in established areas of metropolitan Melbourne, starting in 2026.
“We can’t afford, really, to have vacant land in metropolitan Melbourne sitting idle year-on-year,” Pallas said last week at a Property Council breakfast. “Our clear message to landowners is to either develop the land or sell it to someone who will.”
Cath Evans, the executive director of the Property Council's Victorian division, expressed shock at Pallas' announcement.
“Industry went into this partnership in good faith with the understanding that there will be consultation on any reforms going forward that affect the availability of housing stock,” Evans told The Guardian. “There has not been good faith in the execution of the agreement to date.”
Quentin Kilian, CEO of the Real Estate Institute of Victoria, called the announcement “another regrettable demonstration of poor property policy development, and shortsightedness from the Victorian government.”
“Each time a new tax or a new regulation is introduced, it beats confidence out of one of the state’s most important economic contributors – a sector already shaken by years of new and raised taxes, but one that still contributes almost half of Victoria’s tax revenue,” Kilian said in a statement.
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Pallas said the taxes were intended to change investor behaviour by discouraging long-term land banking. However, Kilian said that the proposal would ultimately do more harm than good.
The expansion of the tax is expected to affect approximately 600-700 additional homes, generating around $6 million in revenue annually, The Guardian reported. However, single-family holiday homes will be exempt from these changes, as Pallas described the measures as "very modest."
“We can assure Mr Pallas, and his team of policy makers, that the only behaviour this idea will initiate is for more landowners to sell up and continue to turn away from Victoria for investment,” Kilian said. “It will create more uncertainty in investment at a time when the participants in the sector are crying out for consistency and commonsense and concepts that inject more confidence into real estate regulation.”
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