Victoria is paying for the 2020/2021 government imposed Covid benefits through land ownership from 2024 through to 2033.
There are now 300,000 more Victorian investors paying land tax, than in 2023.
There are three ways the Victorian government imposes land tax:
- General land tax
- Land trust surcharge, and
- Absentee owner surcharge (vacant land tax), or a combination of all.
However, there are some reports that the Victorian Government are imposing land tax for a principal place of residence. ABC News reported on landowners in East Gippsland who have sectioned their property for a dependable person unit. They have also been slapped with a $500 land tax bill.
The Numbers
What is the cost to the Melbourne property market?
In the 2021 Census, there were 1,781,346 private dwellings in greater Melbourne: 198,685 were unoccupied and 537,865 were rented. This equates to 11.11 per cent of properties in Greater Melbourne vacant and 30.2 per cent rented.
Fast-track it to April 2024, PropTrack research has shown that the vacant property rate has plummeted to 1.22 per cent. Investors are learning how to avoid paying the absentee owner surcharge. The number of investors paying absentee owner surcharges now are almost negligible. This is great news for renters meaning more homes are available to rent. Developers are also seeing the positives as local government authorities fast track development applications.
However, what does additional land tax mean for the cost to renters and the cost to investors? Let’s look at the historical land tax rates for a property with a land valuation of $200,000 and $1,000,000. Take note: this doesn’t include any increases in value for the property within the three years.
| Land value | 2021 Land Tax | 2024 Land Tax | Difference | Percentage of property worth |
| $200,000 | $0 | $975 | +$975 | 0.4875% |
| $1,000,000 | $2975 | $4650 | +$1675 | 0.465% |
| $200,000 with land trust surcharge | $738.25 | $1713 | +$974.75 | 0.8565% |
| $1,000,000 with land trust surcharge | $6438 | $8163 | +$1725 | 0.8163% |
| $200,000 with absentee owner surcharge | $0 | $8975 | +$8975 | 4.487% |
| $1,000,000 with absentee owner surcharge | $22,975 | $44,650 | +$21,675 | 4.465% |
| $200,000 with land trust and absentee owner surcharge | $4738.25 | $9713 | +$4974.75 | 4.856% |
| $1,000,000 with land trust and absentee owner surcharge | $26,438 | $48,163 | +$21,725 | 4.816% |
The Cost to Renters and Investors
For all properties with a land value of under $300,000, there is an additional $18.75 a week to add for land tax. On a property with land worth $1,000,000 in a land trust, that’s an additional $33.17 per week. That’s not including interest rate increases, council rate increases and insurance increases. Thus, renters must bear the brunt, or investors must dig deeper into their own savings or disposable income. Or worse, investors must sell their investment property, meaning less rental properties to apply the land tax.
If we take the minimum increase per property, the State Government is making over $10 million a week in land tax (based on 537,865 rental properties). The plan for the Victorian Government was to increase the economic impact of land tax to bring $4.7 billion from property investors over the next four years. They can only do it, if investment properties remain.
The backswing is that investors sell up, making room for first home buyers to step into the market (most who won’t pay stamp duty on their purchase and won’t be contributing to land tax), and reducing income for property managers. If this occurs, no one will be paying land tax, making the Victorian Government look for other ways to pay the Covid debt.
The Australian Financial Review wrote that one property manager had lost 52 investor clients due to the Victorian land tax changes of 2024.
Short Term Rental Tax
The Victorian government has also discussed a potential short-term rental tax of 7.5 per cent on income from January 2025 to bring short-term rentals back into the long-term rental market.
According to Inside Airbnb, Metro Melbourne has 25,087 listings on airbnb as short-term rentals, of which 18,327 are entire homes or apartments. 24,638 of the 25,087 listings meet the short-term rental criteria of stays under 30 days, which would attract this tax.
From those within the airbnb networks and with no announcement in the May 2024 State Budget, the discussions on this additional tax have been shelved. The Greens state that they don’t believe that this additional tax will help the housing crisis, as it would only affect 1.38 per cent of Victorian dwellings.
How to Keep Your Investment Cash-Flow Positive?
This begs the question. How can you keep your investment property and maintain a strong return to help you pay this additional tax? Well, Real Copy Right can help you.
Our copywriters think inventively in how to maximise your rental return to help you keep your investment property. We help our investors with long-term, medium-term and short-term rental solutions to maximise your income. Our strategies look deeper into the type of market you want to attract to your property. We pull on the emotive heartstrings that enable renters or guests to choose your property over all others. More importantly, we help get renters/guests to see the value in your property to pay more or stay longer. In the long run, it makes it easier to pay your residential land tax.
If you need to sell your property, we can also help you attract the best buyers. Contact us at orders@realcopyright.com.au to discuss with us how to best position your property in today’s volatile market.
