By Michael Fetter

3 May 2016

Foreign purchasers will face increased property surcharges to ensure they “pay their fair share”, as stated by State Treasurer, Tim Pallas.

The proposed 2016-17 Victorian Budget is seeking to increase the stamp duty surcharge payable by foreign investors who purchase residential real estate in Victoria from 3 percent to 7 percent. This will apply to contracts signed on or after 1 July 2016.

The land tax surcharge on absentee owners has also been raised from 0.5 percent to 1.5 percent and is proposed to be effective from 1 January 2017. Mr Pallas has announced that these measures guarantee that foreign buyers, who are not charged payroll tax or GST, yet, enjoy the capital growth associated with Victoria’s liveability, will fairly contribute to the development and maintenance of government services and infrastructure. The budget changes are also expected to raise $486 million over the next four years.

Since the introduction of the initial surcharges, Mr Pallas has stated that “there has continued to be a welcome and steady stream of foreign interest in our residential real estate”.

While the Andrews Labor Government does not believe the higher tax rates will act as a disincentive for foreign investors, opponents have argued that they will have a negative impact on foreign demand for Victorian homes.

The NAB Quarterly Australia Residential Property Survey – Q1 2016 revealed that there has been a shift in foreign buyers away from Victoria. Foreign purchases fell to a 2.5 year low in the first quarter of 2016, with foreign buyers accounting for around 1 in 10 new home sales. In late 2014, foreign purchasers accounted for 1 in 3 new property sales

There is concern that the tax increases may damage investment confidence and impact on future housing affordability.

State Shadow Treasurer, Michael O’Brien believes the increased surcharges will be passed on to Victorian residents as “higher taxes on property simply means higher rents”.

It will certainly be interesting to see how these tax changes unfold and impact upon the Victorian property market.


For more information please contact a member of the Property Law Team.

Related Articles

View All
Commercial Law / Commercial Contracts & Agreements / Property & Development

Commercial and Industrial Property Tax Reform – What does it actually mean?

The reform will implement change progressively from 1 July 2024 and will look like this: This reform presents an...
Read More
Property & Development / Developments / Real Estate Agents

Property Law Changes – Land tax adjustments, vacant residential tax & windfall gains tax

A prohibition on the ability of a Vendor to pass on land tax liability assessment against a property The current...
Read More
Commercial Contracts & Agreements / Leasing & Lease Disputes / Property & Development

Exercising Options

If a lease is a retail lease, the provisions of the Retail Leases Act (Vic) (2003) will govern the exercise of option...
Read More
Construction / Owners Corporations / Planning

Occupancy permits – the ticking clock in defective building work

Where multiple occupancy permits are issued in relation to a building permit, which permit is the operative permit for...
Read More
Commercial Law / Property & Development / Developments

2023-2024 State Budget Recap

Acquisitions of Commercial and Industrial Properties From 1 July 2024, Land transfer duty (stamp duty) on commercial...
Read More
Adverse Possession / Commercial Law / Family Law

2024 Best Lawyers list out now

Tisher Liner FC Law are proud to announce that this year three of our Principals have been selected by their peers for...
Read More
Property & Development / Planning

The 1, 2, 3 of Property Law Reminders for NY2023

In so reflecting, reflecting on one’s property matters (current or proposed for the future) is also a worthwhile...
Read More
Planning / Property & Development / Construction

Section 9AC of the Sale of Land Act – What does ‘materially affect’ mean?

Throughout the registration period, a Plan of Subdivision may undergo many amendments from the proposed Plan which was...
Read More
Property & Development / Leasing & Lease Disputes / Real Estate Agents

CTRS protections has ended. What do you do now when a tenant defaults?

What can landlords do if a tenant breaches the lease If a tenant is in breach of a lease, the landlord may charge...
Read More
Property & Development

Early deposits. Your FAQ’s answered

This blog explores what is required in order for a Vendor to obtain their deposit prior to settlement and what a...
Read More
Property & Development / Real Estate Agents

Stamp Duty is now payable on late settlement and default penalty interest

The dutiable value of a property is the value in which stamp duty is determined to be due and payable at settlement by...
Read More
Property & Development / Commercial Contracts & Agreements

Market rent reviews under the Retail Leases Act 2003: Applying to the VSBC for the appointment of a Specialist Retail Valuer under the Act

In Part 1 of our blog series, we explored market rent reviews generally This is Part 2 of our 2 part blog series, in...
Read More