Victoria Property Buyer First To Fall Victim To Government Xenophobia
Victorian Property Buyers First Victims of Government Xenophobia
This week the Victorian Government became the first state to try and actively discriminate against certain property buyers, but as so often happens with new legislation there are some interesting unintended victims including one of my own staff and several of our clients.
As background this week the Victorian State Revenue Office brought in a new transfer duties starting the 1st of July 2015 that apply a 3% surcharge that affects all residential purchases, transfers and even long-term leases of residential land in Victoria for foreign investors.
Now at first glance a 3% surcharge for foreign investors doesn’t seem like much so ‘why the fuss’ you ask?
On a typical Median Price Melbourne Property* valued at $688,000 the new surcharge could add nearly $20,000 to the purchase price, and taking the Victorian Government collections on the property sale to over $56,000.
So, why has the Victorian Government moved to increase stamp duties?
Simple really, with all the talk and talkback radio in the media about both the housing bubble in Australia and about the effects that foreign investment may be having on housing prices, the Victorian Government has been discussing various ways of cooling housing prices and implementing changes to try and cool the market.
‘So, I am an Australian’ I hear you say. ‘What has this got to do with me?’ Well firstly everyone (Australian citizen or not) will be required to complete a ‘Purchaser Statement’ as part of the settlement process. This form will then be used by the State Revenue Office to decide whether or not you are classed as a foreign investor or not. No big deal other than some more fees from your conveyancer /solicitor for yet more government red tape.
Importantly though as the criteria is based on the ‘transferee’ the issue of residency may not be as straightforward as you would think, particularly if you are purchasing through a trust or a company structure where the Citizenship of all the beneficiaries of a trust or a shareholder of a company may get caught up in these provisions. If you have a family trust, get ready to start telephoning people to confirm their citizenship status.
This is where one of my team gets caught up in the new rules, so even though they came to Australia over 20 years ago, became a dual citizen, married an Australia over 10 years ago and has 2 children they would be classed as a foreign investor for this purpose. The final nail in their Victorian property purchase though is that they also own a share of a very small property in their country of origin and so are considered a foreign investor.
And as I prepared this article I spoke with two more clients who immigrated over 30 years ago to Australia but not have taken out citizenship and, as a result, will also be caught by this new surcharge. As a result, should they wish to invest in Victoria due to the new rules they would be facing an extra $20,000 Stamp duty bill (based on that median house price mentioned) that the person next to them at auction would not. So while these clients have now both decided on another state to invest in, and at this point the new duty is purely for residential properties and only in Victoria, it is quite likely we will see variations on the theme begin to pop up around the country.
For the moment though this small change by the Victorian Government could open up some great opportunities if you are and Australian Citizen and conversely could be a good reason to look to another state if you’re not.