Anyone intending to buy a property, particularly for investment purposes, needs to be aware of the new Victorian Residential Property Tax (Vacancy Tax) that comes into force on 1 January 2018, according to Parke Lawyers Managing Director Jim Parke.
Mr Parke warns owners of any properties around inner and middle Melbourne that are vacant for six months or more will have to pay the Vacancy Tax.
The new tax will be charged at 1% of the Capital Improved Value on properties in 16 council areas in Melbourne. It will be in addition to land tax and council rates.
The tax will apply to all properties in the designated areas, including land on which a home is being renovated or where a former residence has been demolished and a new home is being constructed.
Mr Parke, who is an accredited business law specialist, says people intending to purchase a property in these Melbourne metropolitan areas will need to keep records of the use of the property.
The Vacancy Tax is assessed by calendar year and the six months do not need to be continuous.
For example, on property valued at $1.5 million, the Vacancy Tax will be $15,000.
It covers the following council areas: Banyule, Bayside, Boroondara, Darebin, Glen Eira, Hobsons Bay, Manningham, Maribyrnong, Melbourne, Monash, Moonee Valley, Moreland, Port Phillip, Stonington, Whitehorse and Yarra.
Mr Parke says the Victorian Government has introduced the tax to help address the lack of housing supply in Victoria, particularly in inner and middle Melbourne.
He says transitional provisions exist for property owners to take remedial action in relation to properties that are currently vacant.
“Exemptions also apply to properties used as holiday homes or a business or properties under construction, as well as land that has changed ownership in the year preceding the tax year.”
The tax will be administered by the State Revenue Office as part of the annual land tax process and it is expected that this office will audit vacant properties.
The State Revenue Office has sophisticated processes for identifying the extent of use of a property, for example, monitoring the use of electricity and water.
Mr Parke says it will be a double blow for any foreign investors acquiring residential property in Victoria as the Federal Government has introduced a vacancy charge as part of an annual ongoing requirement under Australia’s foreign investment regime.
He says these new measures, which apply throughout the country, require foreign investors to report annually on the use of their residential landholding and pay a charge equal to their original investment approval fee if their property is vacant for at least 6 months per year.