Victoria State Budget: Stamp Duty changes for Foreign Investors

Victoria: Stamp duty reform for property acquired by foreign residents

The budget outlines that Victoria is expected to derive a $1.2 billion surplus for the next financial year and $1.8 billion by 2018-19. Whilst this is a significant improvement on the previous year, it represents a decline to the most recent surplus forecast in December 2014.

In a bid to manage and maintain the State’s net operating balance in light of revised growth figures, the budget proposes a number of important reforms to state taxes in Victoria. There are two key tax changes announced in this regard. These are:

  1. a proposed increase to the rate of stamp duty levied on properties purchased in Victoria by foreign investors. With effect from 1 July 2015, the Government proposes to increase the rate of stamp duty charged on transfers of real property by 3% where the transfer is made to any person or entity that is not a permanent Australian resident or a New Zealand citizen at the time of the transaction; and
  2. from 1 July 2016, a proposed surcharge of 0.5% to land tax payable on new and existing properties held by absentee property owners.

property_investorsThe proposed changes have come about from the substantial increase in foreign investment in Victoria during the last financial year (which has double from $5.8 billion to approximately $14 billion).

Across Australia, foreign investment has also tripled over the same period. According to the Property Council of Australia, foreign investment in Australian real estate currently represents approximately 4.6% of total residential purchases.

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