Concise overview of the budget concerning property tax
The fiscal budget delivered by Treasurer Pallas includes a COVID-19 debt tax, designed to collect an additional $8.6 billion in taxes over a four-year period. Over half of this burden will fall on investors, vacation homeowners, and commercial property holders, amassing to $20 billion over a decade.
A new COVID-19 debt temporary land tax surcharge will apply in addition to existing land tax from the 2024 land tax year for 10 years.
Exempt properties—including your home—remain exempt from this surcharge. This means the value of exempt property is not included in your landholdings.
General land tax rates
- For taxable landholdings between $50,000 and $100,000—a $500 flat surcharge will apply
- For taxable landholdings between $100,000 and $300,000—a $975 flat surcharge will apply
- For taxable landholdings over $300,000:
– a $975 flat surcharge
– an increased rate of land tax by 0.10 percentage points.
Trust surcharge land tax rates
- For taxable landholdings between $50,000 and $100,000—a $500 flat surcharge will apply
- For taxable landholdings between $100,000 and $250,000—a $975 flat surcharge will apply
- For taxable landholdings over $250,000:
– a $975 flat surcharge
– an increased rate of land tax by 0.10 percentage points.
The absentee owner surcharge rate will increase from 2% to 4% and the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000. (The threshold for land held by an absentee trust remains unchanged at $25,000). For more details, click here.
Does Hiking Property Taxes Truly Boost Revenue?
Governments frequently resort to raising taxes under the banner of generating more revenue.
Although tax hikes are often well-received by the public, it’s been consistently demonstrated that elevating taxes on businesses or individuals often results in a decline in actual government revenue. The Laffer Curve concept serves as a relevant example in this regard.
Amid a rental or housing shortage, it’s likely that the Victorian government’s strategy of increasing taxes on property investors will backfire.
A Brief History of the Laffer Curve
Arthur Laffer first introduced his theory in 1974 to the members of President Gerald Ford’s administration. Back then, the common belief was that a surge in tax rates would lead to a rise in tax revenue.
However, Laffer argued against this, stating that the more a business is taxed, the less inclined it would be to invest. Furthermore, a business would seek methods to shield its capital from excessive taxation or even consider relocating a portion, if not all, of its operations overseas. Likewise, when workers observe a larger chunk of their earnings being deducted for taxes, their motivation to work harder diminishes.
Laffer maintained that escalating tax rates would ultimately lead to a decrease in total revenue. Additionally, he proposed that the economic implications of curbing work and investment incentives by increasing tax rates could harm the economy.”
Rental crisis and housing shortages in Melbourne
Melbourne is facing a rental crisis, with rents at record highs and vacancy rates at record lows. This is making it increasingly difficult for people to find affordable housing in the city.
There are a number of factors contributing to the rental crisis in Melbourne. One factor is the strong population growth in the city. Melbourne’s population has grown by over 200,000 people in the past five years, and this growth is expected to continue. This population growth is putting a strain on the city’s housing supply, driving up rents.
Another factor contributing to the rental crisis is the low vacancy rate. The vacancy rate in Melbourne is currently at just 1.3%, which is the lowest it has been in over a decade. This low vacancy rate means that there are very few rental properties available, which is driving up competition and pushing up rents.
The rental crisis is having a significant impact on people in Melbourne. Many people are struggling to afford rent, and this is forcing them to make difficult choices about where to live. Some people are being forced to move further out of the city, where rents are lower. Others are being forced to share accommodation, or to live in overcrowded conditions.
The rental crisis is also having a negative impact on the economy. When people are struggling to afford rent, they have less money to spend on other things, such as food, clothes, and entertainment. This is having a negative impact on businesses in Melbourne, and it is also slowing down the city’s economy.
Social Housing in Victoria
The percentage of social housing in Victoria is 2.9%. This means that 2.9% of all housing in Victoria is owned and managed by the government or non-profit organisations.
The percentage of social housing in Victoria has been declining in recent years. In 2014, the percentage of social housing was 3.5%. The decline in the percentage of social housing is due to several factors, including:
- The lack of funding for social housing
- The rising cost of housing
- The increasing demand for social housing
Renters in Victoria
As of 2021, 24.9% of households in Victoria were renting privately. This means that over 1 million households in Victoria were renting their homes from a private landlord. The percentage of renters in Victoria has been increasing in recent years, and it is now higher than the national average of 22.7%.
Victoria is facing a housing shortage. The state has a population of over 6.7 million people, and the demand for housing is outpacing the supply. This is leading to higher rents and house prices making it difficult for people to find affordable housing.
Solution
The solution to the housing crisis is not to raise taxes and build more homes. Instead, the government should encourage and intensify private housing providers to alleviate the rental crisis and housing shortages. Popular policies that appease the public will only end up costing the public in the long run.
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Fiscal budget unveiled by Treasurer @timpallas brings a wave of changes to #propertytax. Investors, vacation homeowners, & commercial property holders face a significant burden, wt $20bn expected over a decade. Check out @hyellina's article. #TheIndianSunhttps://t.co/NOis0mNp3q
— The Indian Sun (@The_Indian_Sun) May 24, 2023
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