New taxes on richest Vic property owners

·3-min read

Victoria's wealthiest property owners will be hit with new taxes to boost the state's economic recovery out of the coronavirus pandemic.

Ahead of next week's 2021/22 state budget, Treasurer Tim Pallas has announced $2.7 billion in measures that will see developers and other wealthy landowners make a larger contribution compared with those at the bottom and middle of the wealth scale.

Mr Pallas said this would make Victoria's tax system "fairer and more progressive" and was consistent with reforms being brought in by US President Joe Biden to "mobilise new revenue from those in the best position to contribute".

Among the new taxes is a "windfall gains tax" on property developers who can make huge profits overnight when ex-industrial land is re-zoned to be turned into residential estates.

The new measure will raise $40 million a year, with the money to be invested in public transport, schools and other community needs, Mr Pallas said.

The government is also targeting men's private clubs such as the exclusive Melbourne Club in the CBD by stripping them of their land tax concessions.

This brings them into line with other private organisations who must already pay land tax on their land holdings.

Taxes on large land holdings will also increase to raise more than $380 million a year. From January 1 next year the land tax rate will rise by 0.25 percentage points for taxable landholdings worth more than $1.8 million and by 0.30 percentage points for those exceeding $3 million.

Stamp duty on properties worth more than $2 million will increase from 5.5 per cent to 6.5 per cent, raising an extra $137 million a year on average.

Asked by reporters if the government was unfairly taxing the rich, Mr Pallas said those with the capacity to provide were being required to make a "modest contribution" for a more cohesive community.

While the property industry was hit hard in the early phase of the pandemic - for which it received ample government support - there had since been a "massive bounce back" of wealth accumulation at the top end of the market, he explained.

The Victorian Chamber of Commerce voiced concern in response to the pending new taxes, particularly in relation to increases in stamp duty and land tax.

"People will be disincentivised to invest in things like factories and shop fronts while it will also have a negative impact on the residential property market as people will be reluctant to upsize considering the huge tax implications for doing so," chief executive Paul Guerra said.

"It will drive up house prices in the $2 million plus category overnight."

Opposition Leader Michael O'Brien lambasted the government's new tax hikes, saying it was "taking a baseball bat" to Victorians' finances.

It was "economically reckless", he said, and would hurt small businesses.

Mr O'Brien said this was because increased land tax would prompt landlords to hike commercial rental prices.